WORKING FOR OUR CUSTOMERS - United States … and copyright protection. Advising the Secretary of Commerce, the President of the United States, and the Administration on the trade-related

A PATENT & TRADEMARK OFFICE REVIEW

WORKINGFOR OUR

CUSTOMERSA Patent and Trademark Office Review

FISCAL YEAR 1994

WORKING FOR OUR CUSTOMERS

THIS VOLUME CONTAINS:

Commissioner’s Annual ReviewChief Financial Officer’s Financial StatementGovernment Performance and Results Act Performance Plan


WORKINGFOR OUR

CUSTOMERSA Patent and Trademark Office Review

U.S. Department of CommerceRonald H. Brown, Secretary

U.S. Patent and Trademark OfficeeBruce A. Lehman, Assistant Secretary of Commerce

and Commissioner of Patents and Trademarks

PATENT AND TRADEMARK MISSION:The PTO promotes industrial and technological progress in the UnitedStates and strengthens the national economy by:

Administering the laws relating to patents and trademarks.

Advising the Secretary of Commerce, the President of theUnited States, and the Administration on patent, trade-mark, and copyright protection.

Advising the Secretary of Commerce, the President of theUnited States, and the Administration on the trade-relatedaspects of intellectual property.



TABLE OF CONTENTSMission Statement i

Message from the Commissioner 1

Executive Summary 2

Our Business: An Introduction 5

1994 Highlights 7

Intellectual Property Protection 7 Policy Initiatives 7 Patent Protection and Dissemination Programs 8 Trademark Protection and Dissemination Programs 10

Quality is Customer Satisfaction 12 Meeting Customer Needs 12 Reorganizing the PTO 12 Employing Better Processes 13 Improving Information Technologies 14 Enhancing Human Resources 14

Government Performance and Results Act 17Performance Plan 18

The Year Ahead 23

Critical Areas for Financial and Management Improvement 25

Chief Financial Officer’s Statement 27 Statement of Financial Position 36 Statement of Operations and Changes in Net Position 37 Statement of Cash Flows (Indirect) 38 Statement of Budgetary Resources and Actual Expenses 39

Inspector General’s Report 471 — Inspector General’s Report on Financial Statements 482 — Inspector General’s Report on Internal Control Structure 503 — Inspector General’s Report on Compliance with Laws and Regulations 55

Additional Information 57 Organizational Chart 58 Supplementary Financial Information

Patent Fees 59 Trademark Fees 59 Other Services Fees 59 1994 Statement of Operations by Program 60 1994 Program/Operating Expenses by Program 61

Statistical Tables 62 Glossary of Terms 79



MESSAGE FROM THE COMMISSIONERAmerican technological advancement can only begin in one place— in the minds of our thinkers and creators. To support andcultivate this creative genius, the PTO must ensure strongintellectual property protection for all Americans in the globalmarket place of today.

The importance of effective intellectual property protectionworldwide has created new challenges and opportunities for thePTO. This year the PTO was involved in many policy initiativesto strengthen protection for intellectual property. By entering intonegotiations and agreements with our international counterparts,the PTO seeks to play a leadership role in the development of acreative environment that promotes open markets, healthycompetition and strong intellectual property protection.

Defining a leadership role in this area places significant responsibil-ity on the PTO to create a world class organization that sets thestandards for quality patent and trademark operations as well assound financial performance. In 1994, rising consumer demandand increased patent maintenance fee collections contributed tototal revenue of $544 million, an increase of nearly 10 percent fromthe prior year. Total expenses climbed by 6 percent to $485million. At the end of the fiscal year, total assets approached $337million, and liabilities totaled $235 million.

We at the PTO remain focused on providing effective and efficientpatent and trademark service to our customers. Emphasis remainson reducing both patent application and trademark applicationpendency, and modernizing our operations. Although manyimprovements were made, there is more to be accomplished. In1994, the trademark program area struggled with processing delaysin the pre-examining and pre-publication areas. With a supportiveand dedicated staff, we expect to reduce these delays significantly infiscal year 1995.

Fiscal year 1995 will no doubt present the PTO with its share ofchallenges and opportunities. Armed with a clear strategic plan anda diverse and expert staff, we will continue to provide theintellectual property protection.

Bruce A. LehmanAssistant Secretary of Commerce

and Commissioner of Patents and Trademarks

1


EXECUTIVE SUMMARYFINANCIAL HIGHLIGHTS

Financial Results

As of September 30($ in millions)

1994 1993 1992(unaudited)

Total Revenue 543.7 493.6* 414.7Total Expenses 485.4 456.9* 349.7Excess of Revenues over Expenses 58.3 36.7* 65.0

Total Assets 337.1 250.7 212.0Total Liabilities 234.9 201.7 194.8Net Position 102.2 49.0 17.2

Financial Ratios

Current Ratio 1.44 1.24 1.06Fixed Asset Ratio 0.15 0.17 0.17Revenue per FTE (in dollars) $109,247 $100,925 $90,372

APPLICATION RECEIPTS AND PENDENCY

Patent — Utility, Plant & Reissue(UPR) Application Receipts 186,123 174,553 172,539

Design Receipts 15,431 13,546 12,907

Patent Pendency (UPR) (in months) 19.0 19.5 19.1

Trademark Application Receipts 155,376 139,735 125,237

Trademark Pendency (in months toregistration/abandonment) 16.3 14.4 15.1

*unaudited

2


EXECUTIVE SUMMARYDuring fiscal year 1994 we made significant strides in achieving our goals in many areas. In implementing ournew reorganization and putting the customer responsive process to work some temporary slippages haveoccurred but these are being addressed and we are confident that movement in a positive direction is imminent.

International agreements have moved ahead indicating some major changes in U.S. patent law andpractice as defined by passed legislation and pending legislation, e.g. a twenty year patent term and 18-month publication of patent applications. National Information Infrastructure (NII) work is progress-ing with a final report on intellectual property issues due out in fiscal year 1995.

In fiscal year 1994, 201,554 applications were received for U.S. patents and 113,268 U.S. patents of alltypes were granted.

In fiscal year 1994, 155,376 applications were received for federal trademarks with registration of 68,853trademarks across all classes of goods and services.

We are addressing in concrete ways the needs of our customers, both within and outside the Patent andTrademark Office.

In fiscal year 1994 the Patent and Trademark Office realigned its organizational structure.

Reinventing Government became a reality in the Patent and Trademark Office with projects under-way or planned in our Office of Business Process Reengineering.

The Patent and Trademark Office continues to enhance its automated search and retrieval systems forpatent and trademark examination as well as fully automating its patent and trademark copy orderingsystem.

The Patent and Trademark Office has improved its recruitment, educational, and community outreachprograms.

3

WORKING FOR OUR CUSTOMERS4

Shown top to bottom:1994 Presidential appointee, Michael K. Kirk, DeputyAssistant Secretary of Commerce and DeputyCommissioner of Patents and Trademarks; Lawrence J.Goffney, Jr., Assistant Commissioner of Patents, andPhilip G. Hampton II, Assistant Commissioner ofTrademarks.

A PATENT & TRADEMARK OFFICE REVIEW 5

OUR BUSINESS: AN INTRODUCTION

For over 200 years, the basic role of the Patent and Trademark Office (PTO) has remained the same—to promote the progress of science and the useful arts by securing for limited times to authors and inventors

the exclusive right to their respective writings and discoveries (Article 1, Section 8 of the United States Constitu-tion). Under this system of protection, American industry has flourished. New products have been invented,new uses for old ones discovered, and employment opportunities created for millions of Americans.

The PTO is a non-commercial federal entity and one of 14 bureaus in the Department of Commerce (DOC).The office occupies a combined total of 1,480,763 square feet, in 15 buildings in Arlington, Virginia and threewarehouse storage facilities located in Boyers, Pennsylvania, Newington and Springfield, Virginia. In fiscal year1994, the office employed 4,977 full time equivalent staff (FTE) to support its major functions—the examinationand issuance of patents and the examination and registration of trademarks.

The PTO has evolved into a unique government agency. Since 1991—under the Omnibus Budget Reconcilia-tion Act (OBRA) of 1990—the PTO has operated in much the same way as a private business, providing valuedproducts and services to our customers in exchange for fees which are used to fully fund our operations. Theprimary services we (the PTO) provide include processing patents and trademarks and disseminating patent andtrademark information.

Through the issuance of patents, we encourage technological advancement by providing incentives to invent,invest in, and disclose new technology worldwide. Through the registration of trademarks, we assist businessesin protecting their investments, promoting goods and services and safeguarding consumers against confusion anddeception in the marketplace. By disseminating both patent and trademark information, we promote anunderstanding of intellectual property protection and facilitate the development and sharing of new technologiesworldwide.

PTO programs are conducted under the following principal statutory authorities:

15 U.S.C. 1051-1127 contains provisions of the Trademark Act of 1946 that govern the administration of the trademarkregistration system of the Patent and Trademark Office.

15 U.S.C. 1511 states that the Patent and Trademark Office is under the jurisdiction and supervision of the Department ofCommerce.

35 U.S.C. contains basic authorities for administration of patent laws, derived from the Act of July 19, 1952, and subsequentenactment. Revenues from fees are available to the Commissioner to carry out, to the extent provided for in appropriationsacts, the activities of the Office. The Patent and Trademark Office is authorized to charge international fees for activitiesundertaken pursuant to the Patent Cooperation Treaty. Deployment of automated search systems of the Office to the public isauthorized.

44 U.S.C. 1337-1338 contains authority to print patents, trademarks, and other matters relating to the business of the Office.

In 1994 the PTO was reorganized into six functions:

Assistant Secretary of Commerce and Commissioner of Patents and TrademarksDeputy Assistant Secretary of Commerce and Deputy Commissioner of Patents and TrademarksAssistant Commissioner for PatentsAssistant Commissioner for TrademarksAssociate Commissioner and Chief Financial OfficerChief Information Officer

6 WORKING FOR OUR CUSTOMERS


1994 HIGHLIGHTSINTELLECTUAL PROPERTY PROTECTIONPlaying a leadership role in intellectual property protection is a top priority of the PTO. Strong intellectual propertyprotection translates not only into protection of valuable inventions and investments, but also improved competitivenessand economic growth for America. In order to ensure that our creators and inventors will receive the best protection bothhere and abroad, the PTO continues to work toward improving both the global intellectual property arena and our ownnational patent and trademark protection programs.

Policy InitiativesFiscal year 1994 was marked by major developments in intellectual property protection:

Agreement on the Trade-Related Aspects of Intellectual Property (TRIPS)The TRIPS Agreement is one of several agreements negotiated in the Uruguay Round of Multilateral Trade Negotiationsunder the General Agreement on Tariffs and Trade (GATT). The TRIPS Agreement establishes intellectual propertyprotection standards for the more than 110 countries that participate in the GATT. One of the most importantrequirements of the TRIPS Agreement requires the United States to introduce legislation that would adopt a twenty-yearpatent term measured from the date of filing of the patent application. The GATT implementing legislative package wasintroduced in the Congress at the end of fiscal year 1994.

U.S.-Japan Letters of AgreementThe U.S.-Japan Letters of Agreement, signed by Commerce Secretary Ronald H. Brown and Japanese AmbassadorTakakazu Kurizama on August 16, 1994, requires the PTO to introduce legislation to expand the grounds for requestingpatent reexaminations, to permit increased participation by third parties in reexaminations, and to provide for thepublication of patent applications. The Japanese Patent Office will eliminatedependent patent compulsory licenses. The Patent Application Publication Actwas introduced in the Congress on September 30, 1994.

National Information Infrastructure (NII)The PTO is involved in the creation of a new era in information disseminationthrough the NII—more commonly referred to as the informationsuperhighway. Assistant Secretary and Commissioner Bruce A. Lehman chairsthe Working Group on Intellectual Property Rights under the White HouseInformation Infrastructure Task Force. On July 7, 1994, the Task Forcereleased a preliminary draft of the working group’s report entitled the“Intellectual Property and the National Information Infrastructure.” The finalreport is due out in 1995.

As a demonstration of the important ways in which the Administration’s NII canimprove people’s lives, in 1994, the PTO worked to place the full text and images ofalmost 1,500 AIDS-related patents on the Internet. By putting the AIDS-related patentson the Internet, we hope to assist the research community in combating the spread of thedeadly disease. The AIDS patent database is available on the Internet World Wide Weband also through an electronic mail gateway. Internet users with access to a WorldWide Web client should open the URL http://www.uspto.gov.


Continuing Intellectual Property Protection EffortsOur efforts include: continuing the negotiation of the Trademark Law Treaty, a Protocol to the Berne Convention for theProtection of Literary and Artistic Works and a new instrument on the protection of the rights of performers andproducers of sound recordings; working with the National Economic Council to strengthen the protection of intellectualproperty in the United States; providing legal/technical advice on the intellectual property laws of other countries forimplementation of “Special 301” trade actions, for determinations regarding the Generalized System of Preferences, and fornegotiation of bilateral investment and economic treaties, intellectual property agreements and science and technologyagreements.

Patent Protection and Dissemination ProgramsThe rapid advancement and innovation of technology today requires a patent protection system that is swift and adaptableto the needs of individual inventors, small businesses and multinational corporations. The efficiency and effectiveness of thepatent system continues to be improved as a result of our goal to reduce patent pendency and to modernize our operations.

Patent ApplicationsIn fiscal year 1994, we received a record number of patent applications totaling 201,554. Of this number, 186,123 wereutility, plant and reissue (UPR) patent applications, and 15,431 were design applications. The total number of applicationsreceived in fiscal year 1994 represented an increase of 13,455 above the number of applications received in fiscal year 1993.

Patents IssuedOur ability to maintain quality examination and productivity resulted in the issuance of 113,268 patents in fiscal year 1994.This number represents 102,130 UPR patents and 11,138 design patents. The overall increase in patents issued in fiscal year1994 over fiscal year 1993 was 5,936.

Patent Applications and Production (Examiner Disposals)


Patent PendencyEven with this influx of patent applications, we were able to continue to reduce our overall pendency rate for UPR patentapplications from 19.5 months in fiscal year 1993 to 19.0 months in fiscal year 1994. Additionally, the average designpendency was reduced from 25.5 months in fiscal year 1993 to 21.2 months by the end of fiscal year 1994. Patentpendency was also reduced in specific emerging technologies and technology areas experiencing rapid growth. In particular,pendency for the computer technology area was reduced from 28.5 months in fiscal year 1993 to 26.5 months in fiscal year1994. In the biotechnology area, patent pendency was reduced from 22.2 months in fiscal year 1993 to 20.8 months by theend of fiscal year 1994.

GPRA Performance MeasuresThe Government Performance and Results Act (GPRA) of 1993 (discussed in detail on page 17) requires federal agencies toestablish measures of performance which will provide a means of gauging program performance and accountability. ThePTO, which volunteered to participate in a pilot project under Phase I of GPRA, established the following GPRAperformance measures for the patent program area:

UPR Applications Design Applications

Performance Measures: Plan Actual Plan ActualPatent Applications Filed 179,000 186,123 14,500 15,431Patents Issued 102,000 102,130 11,000 11,138Patent Pendency 19.6 19.0 22.0 21.2

Total Certified Copies of All Types of Patents 108,978Orders for Patent Copy Sales 955,195

Supplier ProjectA limited pilot program was begun in fiscal year 1994 addressing the pre-office action interview by the examiner of theapplicants and/or their attorney/agent. This pilot program is intended to communicate and resolve issues which, if leftunresolved, may become part of an office action and delay allowance of the application by the examiner. The first part ofthe pilot program will continue into fiscal year 1995. The PTO hopes that this pilot program will ultimately result in adecrease in the number of office actions per application, and in swifter prosecution of the application. During fiscal year1994, this pilot program was identified, along with other customer focus projects, for inclusion as a patent programreengineering initiative.

Number of Patent Applications Issued in Fiscal Year 1994


Patent RestorationUnder 35 United States Code, section 156, Extension of PatentTerms, the terms of certain patents may be extended up to fiveyears. Through fiscal year 1994, the Office received 268 applicationsfor patent term extensions and issued 196 certificates of patent termextension. Of the 196 certificates issued, 167 involved patentscovering human drug products, 19 involved patents for medicaldevices, three involved patents for food additives, and seven involvedpatents covering animal drug products. Still pending are 32 requestsfor patent term extensions.

ReexaminationDuring fiscal year 1994, the PTO received 379 reexamination requests.Of these 379 requests, 77 were known to be in litigation. A substantialnew question of patentability was found, and reexamination ordered,in 339 cases. The Office denied reexamination in 30 cases.

Reexamination was completed and certificates issued in 309 cases. Of those completed, patentability of all patent claims wasconfirmed in 83 cases. Claims were modified or added and patentability was confirmed on some existing, modified, or addedclaims in 207 cases. All claims were canceled in 19 cases.

Trademark Protection and Dissemination ProgramsAs the value of trademarks becomes increasingly more important to industry, the PTO continues to receive greater influxesof trademark applications.

Trademark ApplicationsIn fiscal year 1994, we received 155,376 trademark applications—an 11 percent increase over the 1993 filing level of 139,735.The number of trademark application filings continues to increase each year at rates higher than anticipated since theenactment of Intent-to-Use legislation in 1989. This legislation relaxed the requirements for filing an application from actualuse of the mark in commerce to include a bona fide intent to use the mark in commerce. Since fiscal year 1989, thetrademark application workload has increased approximately 87 percent, while fiscal year 1994 staffing levels for thetrademark process exceed those of fiscal year 1989 by only 51 percent.

Trademark Applications and Production (Examiner Disposals)

Trademark Production(Examiner Disposals)


Trademarks RegisteredThe number of certificates of registration for trademark applications, including extra classes, issued during fiscal year 1994was 68,853. In fiscal year 1993, total registrations with extra classes were 86,122.

Trademark PendencyFiscal year 1994 was a year of major change in the Trademark Operation. The entire operation was reorganized to offertrademark applicants one stop customer service. All operations, from receipt and processing of incoming mail topreparation for publication for opposition and placement on the trademark register, are now assigned to the AssistantCommissioner for Trademarks. The implementation of this reorganization and an unusually high number of newapplications filed (155,376) has had the temporary effect of increasing pendency to 5.2 months from filing to first officeaction and 16.3 months to registration. Once the efficiencies of the new organization and work processes are in place,pendency is expected to begin to move toward goal levels.

GPRA Performance MeasuresThe Government Performance and Results Act (GPRA) of 1993 (discussed in detail on page 17) requires federal agencies toestablish measures of performance which will provide a means of gauging program performance and accountability. ThePTO, which volunteered to participate in a pilot project under Phase I of GPRA, established the following GPRAperformance measures for the trademark program area.

Performance Measures: Plan Actual

Trademark Applications Filed 148,000 155,376Trademarks Registered (classes) 90,300 68,853First Action Pendency 3.0 months 5.2 monthsRegistration/Abandonment Pendency 13.8 months 16.3 months

Total Certified Trademark Copies1 35,532Orders for Trademark Copy Sales 25,641

1Includes certified status copies processed by the trademark operation.

Trademark Pendency to Registrations, Abandonments and Notices of Appeal — Fiscal Year 1994


QUALITY IS CUSTOMER SATISFACTIONThe products and services we provide are only as good as the level of customer satisfaction they inspire. On any given day,thousands of individuals from around the world request our products and services. Our goal is to ensure that each andevery one of these customers receive 100 percent customer satisfaction 100 percent of the time.

Meeting Customer Needs“Okay,” said the moderator, “let’s start by switching hats. Forget names, rank, and GS levels. Today, you’re an attorneyand you’re talking about an application you have filed with the PTO. What do you need and expect from the PTO duringthe prosecution of that application?” “High quality in the post-registration process,” responded a trademark employee.“Timeliness,” exclaimed one. “A staff that is responsive to my questions, to the things that I need,” said another, whileheads nodded around the room.

On February 18, 1994 a group of employees were asked to change roles for the morning and think of themselves not asworkers, but rather as customers who expect quality service in every interaction they have with the PTO. This was thefirst in a series of self-analysis workshops conducted by our Center for Quality Services. The purpose of these workshopswas to give employees a fresh perspective on the agency’s primary goals and responsibilities, while helping them to gain abetter understanding of their customers’ needs.

In fiscal year 1994, the Center for Quality Services spearheaded various self-analysis workshops and nationwide customerfocus sessions to determine customer needs and the current level of satisfaction with the kind and quality of our services.As a result of these feedback sessions, service standards were set throughout the PTO that clearly identify and define theneeds of our customers. Employees have initiated new, innovative ways to meet and anticipate the needs of our users,while renewing the focus on complete customer satisfaction to both our internal customers — PTO employees — and ourexternal customers — the patent and trademark users and stakeholders. By continually assessing and monitoring the needsof our customers, we strive to be attuned and responsive to the demands and expectations of those who support our dailyoperations.

ACTIONS FOR IMPROVING CUSTOMER SERVICE

Train our employees to better understand their roles in providing you with quality productsand services.

Critically evaluate and change current patent and trademark processes to increase quality, integrity, customerservice, and cost savings.

Research the best business practices used by successful federal and private organizations and adapt them PTOoperations.

Improve communications with you by using voice mail and facsimile machines. In addition, create a centraloffice for responding to trademark customer questions.

Reorganizing the PTOThe old organizational structure was replaced with a process and customer based organization. A stronger emphasis is nowplaced on responsiveness to the Administration’s policy initiatives and on serving PTO’s customers. Reporting to theAssistant Secretary of Commerce and Commissioner of Patents and Trademarks are:

The Deputy Assistant Secretary of Commerce and Deputy Commissioner of Patents and Trademarks, who hasresponsibility for all policy, and legal, legislative and appellate activities.


The Assistant Commissioner for Patents, who has direct authority over all patent operations in the office fromapplication filing through patent grant, except for appellate activities of the Board of Appeals and Interferences.

The Assistant Commissioner for Trademarks, who has direct authority over all trademark operations of theoffice from application filing through trademark registration, except for appellate activities of the TrademarkTrial and Appeal Board.

The Associate Commissioner and Chief Financial Officer, who has direct responsibility for the planning,financial, budgetary, general administrative, human resources, quality customer enhancements, informationdissemination, and computer facility operations activities.

The Chief Information Officer, who has responsibility for monitoring the business process reengineeringinitiatives and design and development of enhanced automated systems.

In 1994 President Clinton appointed Michael K. Kirk as Deputy Assistant Secretary of Commerce and DeputyCommissioner of Patents and Trademarks; Lawrence J. Goffney, Jr., as Assistant Commissioner for Patents; and Philip G.Hampton II, as Assistant Commissioner for Trademarks. With these appointments, all statutory senior level positions ofthe Patent and Trademark Office are in place.

Employing Better ProcessesThe goal to “employ better processes” is directed towards changing the way we process our work in order to provide thehighest quality products and services in a cost effective manner. In meeting this goal, various Business ProcessReengineering (BPR) efforts are currently underway:

Trademark ProcessThe trademark operation is radically redesigning its practices by introducing electronic application processing into thesystem. The newly proposed process would center around electronic receipt, processing, storage, maintenance, andmanagement of trademark applications and other filings. Once implemented, this system will significantly improveprocessing times in both the pre-examination and examination areas. Additionally, it will improve quality by automatinginitial data capture, instituting standard formats for filing, and initiating work group review and discussion of difficult cases.

Trademark Trial and Appeal Board Support ProcessesAs a result of a 1994 management control review conducted by the Trademark Trial and Appeal Board (TTAB), the TTABwas identified as a prime candidate for business process reengineering. Throughout fiscal year 1994, a team of employeesmet to analyze the work processes of the TTAB’s docketing function. As a result of their efforts, new pilot work practiceswere established.

Patent Pre-Grant PublicationIn response to the agreement with Japan to introduce legislation implementing 18-month publication of patent applications, anengineering effort is in progress to design a process which would enable the PTO to implement 18-month publication byJanuary 1, 1996 (assuming enactment of the legislation which was introduced in September 1994).

PTO Budget and Cost ManagementOur Office of Business Process Reengineering (OBPR) is leading the reengineering of the PTO budget formulation andcost management processes.


Improving Information TechnologiesWhether it is collected from customers, created by us, ordisseminated to our customers, information is one of PTO’s mostvaluable resources. The “information age,” with its emphasis onautomated technologies, is having a profound effect on both ouroperations and our customers. To respond to this demand forimproved information technologies, we continue to upgrade ourinformation systems.

Patent AutomationOne of our most important automation projects is the Automated Patent System (APS). Two major accomplishments forAPS in fiscal year 1994 included:

Creating a second complete database of all U.S. patents issued since 1790 on a rapid-access optical storage device.

Expanding the capability of the Patent and Trademark Copy Sales System to fully automate the customer ordercollation and delivery of patent and trademark copy orders.

Trademark AutomationCurrently, two major automated systems support trademark processing—the Trademark Reporting and MonitoringSystem (TRAM) and the Trademark Text and Image Retrieval System (X-Search). In fiscal year 1994, X-Search wasimproved to respond to the needs and requests of trademark customers and system users. Accomplishments included:

Providing new capabilities for reviewing search results.

Developing and installing a new network based system, thus allowing trademark examining attorneys toconduct preliminary searches at their desktops.

Modifying X-Search to improve system performance capabilities during peak workload periods.

Releasing X-Search version 1.1 Request For Proposals (RFP). As a result of this solicitation, we intend toupgrade the system to allow for more concurrent users and faster text searching capabilities.

Enhancing Human ResourcesIn order to foster the development of an organization that is innovative, decentralized, flexible, and adaptable, we are takinga fresh look at our approach to human resource management. In 1994, through coordination with PTO’s PartnershipCouncil, Strategic Diversity Council, and employee unions, a Human Resources Strategic Diversity Plan was designed.The plan focuses on the following areas:


RecruitmentRecognizing that our success depends upon a high-performing, as well as diverse work force, the PTO will use innovativeoutreach techniques and diverse sources to aggressively build a high quality work force.

Career ManagementWe are committed to meeting the career management and development needs of our employees as well as the requirementsof the PTO for employees who can achieve in a highly automated and highly technical environment. In 1994, as a pledgeto our commitment to prepare our work force for the challenges and changes ahead in the 21st Century work place, thePTO University was established. Under this program, employees have the opportunity to pursue certificates, bachelorsand eventually graduate level degrees. More than 380 employees began taking courses during the University’s first semester.

Quality of Work LifeWe strive to provide a supportive and healthy work environment where the values of quality, teamwork, and personal andfamily commitments can be fostered and balanced. To address operational issues, work life programs and labor-management relations, the PTO Partnership Council was created. The Council—representing management and unionrepresentatives—focuses on developing balanced and supportive work place policies and practices.

CommunicationOpen lines of communication among all levels of employees are critical to achieving our mission. To maintain effectivecommunication channels, we will apply technological advances in communications including electronic mail and bulletinboards, as well as make use of traditional approaches such as employee newsletters.

Community ServiceThe success of an organization is not only defined by its accomplishments in the business world, but also by its devotion toimproving and positively influencing the community, in which it resides. In showing our commitment to both our localand national community the PTO provides various educational and community outreach programs:

Project XL—PTO’s nationwide educational outreach program—proves that there is an inventor in everyone. To inspire thecreativity and ingenuity of our nation’s youth and to assist educators in incorporating creative and inventive thinking intotheir curricula, Project XL holds various exhibits and workshops nationwide. In 1994, the Project XL staff participated inannual conferences held by the National Association for Bilingual Education, the National School Boards Association,New Jersey’s Student Inventions Through Education Program, and the Technology Education Program of MontgomeryCounty, Maryland. Locally, PTO employees volunteered their time to tutor, mentor, and present special programsthroughout schools in the Washington, D.C. area.

Project XL’s collaborative projects with the National InventiveThinking Association, the Cities/Communities In SchoolsOrganization, and the National Institutes of Health Education Office,brought new curriculum material to educators nationwide, helpedexpand the drop-out prevention efforts for Native American students inSouth Dakota, and enhanced Maryland’s technology educationprogram. During the year, more than 4,000 educators requested andreceived Project XL curriculum materials.


Clarendon House—The PTO initiated a pilot employment program with Clarendon House, a community based self-helpmental health center in Arlington, Virginia. The PTO became the first federal agency to join the growing list of ClarendonHouse program supporters.

Cultural Observances —In addition to sponsoring several cultural observances throughout the year, the PTO was one of agroup of nineteen public and private organizations which participated in Diversity Day 1994. Though a mix of trainingworkshops, video presentations, display booths and cultural presentations, Diversity Day symbolizes PTO’s commitmentto valuing diversity, developing cultural awareness in the work place, and fostering efforts to recruit and retain a diversework force.

Work Force ManagementBecause customer satisfaction is our highest priority, compensation and benefits are our biggest investment. We view ouremployees as a valuable resource to be invested and optimized, not as a cost to be cut or minimized.

Recognizing the government-wide initiative to reduce federal employment wherever feasible, we rely upon contractorsupport to supplement the work of our employees. However, the PTO has certain functions—specifically patent andtrademark examination—which cannot be contracted out. Looking ahead to 1995, patent workload is expected to growby 4 percent and trademark workload by 6 percent, yet our overall work force is only expected to grow by less than 2percent. To meet the growing product and service demands, the PTO must maintain an adequate staff of skilled patentexaminers, trademark attorneys, and technical support personnel.


GOVERNMENT PERFORMANCE ANDRESULTS ACT OF 1993The PTO takes every opportunity to explore new ways of providing our customers and stakeholders with high-valuedproducts and services. In January 1994, we were selected to participate in the Government Performance and Results Act(GPRA) pilot program. The purpose of the GPRA is to improve the effectiveness and accountability of federal programsby focusing on program results, quality and customer satisfaction. As a pilot program participant, the PTO has committedto establishing, monitoring and reporting on our program performance, goals and indicators. The following are our 1994and 1995 major performance goals:

Decrease patent pendency and maintain financial self-sufficiency.

Decrease trademark pendency and maintain financial self-sufficiency.

Engage in business-like partnerships with Patent and Trademark Depository Libraries (PTDLs) tailored to theindustry base of that regional industrial arena, and increase the number of PTDLs throughout the nation.

Conduct customer focus group sessions and surveys of individual users, internal customers, law and intellectualproperty associations, and other stakeholders.

The PTO has chosen to take a proactive role in instituting the provisions of the GPRA. In September 1994 we published a StrategicPlan for fiscal years 1996-2000. This comprehensive, high-level document provides a foundation for planning throughout ourorganization.

The PTO is a pioneer in establishing performance goals and measurements. In response to the needs of PTO’s users andstakeholders, in 1982 the PTO engaged in a successful user fee program to reverse the trend and confidence of those whoascribed to the U.S. News and World Report’s February 2, 1981 statement that, “The U.S. patent process is so sluggish,outdated and undependable that it is contributing to the decline of innovation in America.” In 1989, the PTO met itscommitment to reduce patent pendency (the time expended from patent application receipt to patent issue) to 18 monthsand became the world’s fastest and most economical issuer of patents. The trademark program realized its commitment toreduce backlogs and deliver a better quality and more timely trademark registration in 1985.

The achievement of these goals was a result of an agreement among the PTO, Congress, and our users that, if fees wereincreased to recover a higher percentage of operational costs, the PTO would reduce backlogs and deliver better quality andmore timely patent issues and trademark registrations. Thus the direct linkage emerged between PTO’s commitment toimproved program performance in exchange for fees paid by the public. Since 1982, despite fluctuations in patent andtrademark pendency of one to three months throughout this period, the PTO has continued to take the necessary steps tomaintain the commitment that was made to users and Congress over a decade ago.

Our vision for the future is to return to a stable overall pendency level of 18 months for the issuance of a patent and 13months for the registration of a trademark. In addition, the PTO will continue to seek innovative ways to addressacceptable pendency levels for individual areas of technology patents and trademarks. Eighteen-month patent pendency isthe shortest time reasonable and attainable under current statutes and rules and is the international publication standard.Three months to first action notice (the rendering of an initial opinion on the registrability of a trademark early in theexamination process which provides an important indication of whether the trademark may ultimately register) and 13months to disposal (registration or abandonment) of a trademark application is the most acceptable standard for atrademark registration.


The continuation of the commitment to PTO users to provide the most timely and high quality services and products inreturn for total reliance on user fees and no general taxpayer support will remain the major program performance goal forthe bureau. Our efforts to achieve financial self-sufficiency began in fiscal year 1983. This goal was realized with theenactment of the Omnibus Budget Reconciliation Act of 1990 when financial self-sufficiency was accelerated by theimposition of a surcharge upon patent statutory fees. In addition to our performance goal of decreasing pendency, we willcontinue to strive to maintain financial self-sufficiency. Two equally important performance goals will be to improve themethods of disseminated patent and trademark information and to begin the measurement of the overall quality of servicesto customers.

Our experience in program performance measurement has taught us that this process must be a continuous cycle ofdefining and refining measurement tools to assure that the quality of our service is customer oriented. Recognizing theimportance of tapping into the resources of ALL customers, the PTO is conducting customer focus sessions and satisfactionsurveys to attain a higher level of quality service that is defined through the perspective of those who fund our bureau — thefee paying users. In our fiscal year 1994 and 1995 GPRA Performance Plans, the PTO included eight pivotal factors whichwill set the stage for gauging program performance necessary to attain the four major goals: performance vision, a strategicframework, performance goals, processes for achievement, methods of verification and validation, performance indicators,baseline target levels, and finally, anticipated impediments to goal attainment.

GOVERNMENT PERFORMANCE AND RESULTS ACTPERFORMANCE PLAN

Patent Program Performance Vision:To enhance the standard of living, quality of life, and economic growth in the United States through the timely issuance ofpatents. The issuance of timely and valid patents assist in maintaining our nation’s global economic leadership, andprovides incentive and protection for inventors to pioneer new products and technologies into the marketplace. Inconformance with the PTO 1996 - 2000 Strategic Plan, the PTO’s objective is to maintain a stable pendency level whichfosters industrial and technological innovation in the United States. PTO will stabilize (as achieved in fiscal year 1989) thepatent pendency level by achieving to improve its ability to predict and respond to external political, economic, andtechnological changes, which may impact filing levels, fee revenue, pendency, and ultimately, national innovation.

Strategic Framework Goal:While serving all customers in a timely and courteous manner, provide quality intellectual property protection, by issuingpatents in a timely manner.

Program Performance Goal:Decrease patent pendency and maintain financial self-sufficiency.

Processes:Enhance human resources.Leverage information technologies.Employ better processes.

Verification and Validation:Patent program managers will use automated systems for tracking and monitoring all patent applications.PTO managers will monitor performance through the use of monthly Executive Information System (EIS)reports and analysis.


Performance Indicators:1989 1994 1995 1996

Baseline Actual Target Target

Financial self-sufficiency (percent) 70.26 100 100 100Months to issue or abandonment 18.4 19.0 18.9 19.0Months from pendency to first action 7.3 7.7 7.0 8.1

Impediments:Applications (or inputs) are subject to economic and political changes in the U.S. and abroad.Application examination times are subject to technical complexity of applications, examiner experience,response time of applicants to office actions, and number of patent examiners available for examining.

Trademark Program Performance Vision:To promote and protect industrial and technological productivity through the timely registration of trademarks (asachieved in fiscal year 1985). PTO’s goal is to improve its ability to predict and respond to changes in the externalenvironment, which may impact filing levels, fee revenue, pendency, and ultimately, industrial growth. Consistentpendency levels support U.S. businesses in making major marketing and production decisions regarding the placement ofnew products and services in the marketplace. In conformance with the PTO 1996 - 2000 Strategic Plan, achievement ofthis goal will reinforce confidence in consumer and business protection, which is inherent in a timely and defensibletrademark registration.

Strategic Framework Goal:While serving all customers in a timely and courteous manner, provide quality intellectual property protection, byregistering trademarks in a timely manner.

Fiscal Year 1994 Performance Goal:Decrease trademark pendency and maintain financial self-sufficiency.

Processes:Enhance human resources.Leverage information technologies.Employ better processes.

Verification and Validation:Trademark program managers will use automated systems for tracking and monitoring all trademarkapplications.PTO managers will monitor performance through the use of monthly Executive Information System (EIS)reports and analysis.

Performance Indicators:1989 1994 1995 1996

Baseline Actual Target Target

Financial self-sufficiency (percent) 100 100 100 100Months to register trademark 13.8 16.3 15.5 13.9Months to first action 2.8 5.2 3.9 3.0


Impediments:Applications (or inputs) are subject to economic and political changes in the U.S. and abroad.

Application examination times are subject to technical complexity of applications, examiner experience,response time of applicants to office actions, and number of trademark examiners available for examining.

Information Dissemination Program Performance Vision:PTO will engage in better ways of serving the informational needs of uniquely focused industries and will implement newmethods of generating additional sources of revenue by taking a more business-like approach in meeting our responsibilitiesfor disseminating patent and trademark information. PTO’s goal is to enhance methods for disseminating information andincrease our capacity to bring PTO’s most important services directly to our customers. Currently, patent and trademarkinformation is disseminated through paper, microfilm, microfiche, CD-ROM, and at Patent and Trademark DepositoryLibraries (PTDLs). As the world enters the information age and the information superhighway, the PTO will strive toglobally disseminate patent and trademark information in the most accessible and economical means. Our vision is tobegin by utilizing the current PTDL network as mini-PTO satellite offices in areas that have a highly concentrated need forPTO information.

Strategic Framework Goal:While serving all customers in a timely and courteous manner, provide quality intellectual property protection, bypromoting effective access to patent and trademark information.

Fiscal Year 1994 Performance Goal:Engage in business-like partnerships with PTDLs tailored to the industry base of that regional industrial bases and increasethe number of PTDLs throughout the nation.

Processes:Internal PTO approval of partnership agreements by 1st quarter Fiscal Year 1995.External acceptance of two partnership proposals by 1st quarter Fiscal Year 1995.Partnership agreement with the cities of Sunnyvale, CA and Detroit, MI signed by first quarter Fiscal Year 1995.Draft partnership agreement with the city of Albuquerque, NM by 1st quarter Fiscal Year 1996.Development of partnership performance measurements by second quarter Fiscal Year 1995.

Verification and Validation:PTO Business Council will review periodically.Review partnership agreements for compliance.

Performance Indicators:1994 1995 1996

Actual Target Target

PTDLs 78 83 85States in which PTDLs are established 49 50 50Business partnerships 01 3 5

1Partnership agreement signed with city of Sunnyvale, CA, in November, 1994.


Customer Service Program Performance Vision:Users are more willing to invest in research and development if they are confident in the defensibility of the patents issuedand trademarks registered by the PTO. In order to increase investment and consumer confidence, the PTO will establishand implement customer satisfaction standards, which fully reflect the needs and perspectives of the stakeholders and userswho fund our bureau. We will achieve this goal by conducting customer satisfaction surveys and focus group sessions,designed to provide continuous communication and feedback from our users. By continually assessing and monitoringuser needs, the PTO envisions a bureau that is attuned with the demands and expectations of the customers who supportour daily operations.

Strategic Framework Goal:Provide our customers with the highest level of quality and service in all aspects of PTO operations.

Fiscal Year 1994 Performance Goal:To conduct customer focus group sessions and surveys of individual users, internal customers, law and intellectual propertyassociations, and other stakeholders.

Processes:Identify customersRandom samplingConduct customer focus sessions (CFS)Develop standards based on CFSDisseminate standards to process owners, Partnership Auxiliary Committees (PACs)and Joint Partnership Council (JPC)Publish standards to customersDevelop and conduct surveys to validate standardsConduct more CFSDisseminate data from surveys/CFS to process owners, PACs, and JPC for review and developmentManagement makes budget decisions to meet customer needIncorporate into fiscal year 1997 budget request

Verification and Validation:Analysis of customer service survey and focus group results by the PTO Business Council, PTO UnionPartnership Council, and program managers.Center for Quality Services will assess customer satisfaction levels on a continual basis.

Performance Indicators:1994 1994 1994 1995 1995 1995

Baseline Baseline Baseline Target Target TargetPatents TMs Info. Diss. Patents TM Info. Diss.

Customer satisfaction surveys conducted 8 2 0 5 4 1Focus group sessions conducted 12 7 4 16 9 5Customers surveyed satisfied with PTO’s 1 1 1 1 1 1

overall performanceCustomers satisfied with PTO’s established 1 1 1 1 1 1

patent pendency levelCustomers satified with PTO’s established 1 1 1 1 1 1

trademark pendency level

1Surveys undertaken late in Fiscal Year 1994, therefore computation of data was unavailable for baseline and target levels at time of publication.


GOVERNMENT PERFORMANCE AND RESULTS ACTPATENT AND TRADEMARK OFFICE ANNUAL PERFORMANCE PLAN

Patent Patent Patent Total Info. Info(UPR) TM (UPR) TM (UPR) TM PTO Patent TM Patent TM Diss. Patent TM Diss.

Fiscal DisseminatedYear Applications (Issued or Pendency 11Fee Financial Self- External Customer Customer

Actuals Filed Registered) (in months) Collections Sufficiency1 Focus Sessions Surveys Conducted

1982 116,731 73,621 59,853 43,630 24.2 21.3 2522 0.00% 0.00%

1983 97,448 51,014 55,314 47,685 25.5 20.3 82,734 43.24% 100%10

1984 109,539 61,480 67,214 52,290 25.0 19.1 98,841 48.44% 100%10

1985 116,427 64,677 70,244 71,167 23.2 13.8 107,289 44.88% 100%10

1986 121,611 69,253 71,791 55,162 22.0 12.5 127,896 49.75% 100%10

1987 126,407 70,002 82,635 53,884 20.8 13.0 144,685 47.10% 100%10

1988 137,069 76,813 77,844 52,461 19.9 13.3 168,317 57.39% 100%10

1989 151,331 83,169 96,868 58,599 18.4 13.8 192,322 70.26% 100%10

1990 163,571 127,294 89,551 63,924 18.3 15.3 222,526 98.99% 100%10

1991 167,715 120,365 92,474 49,810 18.2 16.7 344,3173 99.51% 100%

1992 172,539 125,237 100,116 69,691 19.1 15.1 427,8154 100% 100%

1993 174,553 139,735 97,386 86,122 19.5 14.4 498,3645 100% 100% 12 7 5

1994 186,123 155,376 102,130 68,853 19.0 16.3 546,8816 100% 100% 12 7 4 8 2 0

TARGET

1995 192,000 157,000 105,800 95,800 18.9 15.5 571,4397 100% 100% 16 9 5 5 4 1

1996 200,000 166,000 109,200 101,300 19.0 13.9 639,7568 100% 100% 12 12 12 12 12 12

1997 208,000 176,000 110,300 107,400 20.1 13.8 665,2439 100% 100% 12 12 12 12 12 12

1 Cost recovery percentages for patents and trademarks were calculated by dividing the fiscal year’s general fund appropriation amount by the total obligation amount and subtracting that percentage from 100percent.

2 Prior to 1983, fee collections, with the exception of reexamination fees, were returned to the U.S. Treasury.3-9 Collections include patent surcharge fees as follows: FY 1991 - $99,307, FY 1992 - $95,000, FY 1993 - $99,000 FY 1994 - $103,000, FY 1995 - $107,000, FY 1996 - $111,000, and FY 1997 - $115,000.10 Self-sufficiency calculations for Trademark from 1983 to 1990 include only direct Trademark obligations.11 Reflects actual collections in thousands that have not been adjusted for deferred revenue.12 Surveys undertaken late in FY 1994, therefore computation of data as unavailable for baseline and target levels at time of publication.NOTE: Historical data not available for shaded areas, program not implemented until FY 1994. Pendency levels were extracted from Congressional budget submissions.


THE YEAR AHEADPTO expects to issue 105,800 utility, plant and reissue patents and register 95,800 trademarks in fiscal year1995.

The PTO’s 1996 - 2000 Strategic Plan was published and transmitted to the Congress, the Administration,and PTO employees and customers.

The GATT Treaty was signed by President Clinton on December 8, 1994 and 20-year patent term becomeseffective on June 8, 1995.

The United States signed the Trademark Law Treaty on October 28, 1994 and the PTO will work with itsCongressional Committees to introduce implementing legislation in the 104th Congress.

The Twelfth Trilateral Conference was held in Tokyo on November 18, 1994, and the European PatentOffice, the Japanese Patent Office and the PTO recognized the necessity and importance of furtherinternational harmonization of their patent systems and expressed their intention to continue theircooperation on the many projects that are under way.

Legislation to implement an early publication system is expected to be reintroduced in the 104th Congress;public hearings on regulatory issues will be held on February 15, 1995.

The Patent Reexamination Reform Act was passed by the Senate on October 4, 1994, but was not passedby the House of Representatives. The legislation is expected to be reintroduced in the 104th Congress.

The final report on the National Information Infrastructure (NII) is expected to be issued in the first half offiscal year 1995.


On October 26, 1994, AIDS-related patents were available on the INTERNET; through the TrilateralAgreement, AIDS-related patents from the Japanese Patent Office and the European Patent Office are beingselected for addition to the data base.

A partnership agreement was signed with the University of New Mexico on October 6, 1994 to strengthenenginneering, scientific, and technological programs especially for women and minorities for the mutualbenefit of the University and the PTO.

The PTO University will be expanded to accommodate 398 students and offer seven courses which will leadto Certificate and AA degrees. Also in fiscal year 1995, the PTO will begin curriculum research for theimplementation of Bachelor’s and graduate level degrees in 1996.

The Pre-Grant Publication System (PGPub) will be implemented by January 1996 to publish patentapplications by 18 months from the earliest effective filing date.

Access to the Automated Patent System’s Full-Text Search and Retrieval (APS-Text) will be offered to allPatent and Trademark Depository Libraries beginning January 1995.

A partnership with the Sunnyvale Center for Innovation, Invention, and Ideas (SCI3) located in Sunnyvale,California was initiated in November 1994 to find better ways of serving the needs of uniquely focusedregions across the country by developing a wide range of products and services that would be beneficial tolocal citizens and businesses.

A similar partnership with the Detroit Public Library is expected to be completed in the first half of 1995.

A survey of approximately 10,000 patent and trademark customers will be completed as a follow-up tofocus sessions conducted in fiscal year 1994.


CRITICAL AREAS FOR FINANCIALAND MANAGEMENT IMPROVEMENTIn 1994, the PTO continued to address the following critical areas for financial and managementimprovement: a resolution of the bureau’s long-term space needs; restrictions in the number of personnel ceilingsallotted to the bureau; and continued diversion by the Congress of patent fee surcharges to the programs of other agencies.In addition, Secretary of Commerce Ronald H. Brown signed an agreement with Japan to institute a pre-grant patentpublication (PGPub) system at the PTO by January 1, 1996. Planning for the PGPub system began in 1994. The newsystem will affect patent examination practice, result in new expenditures and fees, and alter the deployment schedule of thePatent Application Management (PAM) system.

SpaceLeases held by the PTO in Crystal City will begin to expire in fiscal years 1996 and 1997. During 1994, the PTO and theGeneral Services Administration (GSA) agreed to a threefold space acquisition strategy: (1) that the PTO receives the mostbeneficial space cost available; (2) that adequate space for continued PTO growth is considered; and (3) any possible futurelocation is conducive to PTO’s functions and is easily accessible by PTO employees. The PTO and the GSA provided theOffice of Management and Budget with a space prospectus late last summer. The prospectus assumed the solicitation ofbids in early calendar year 1995.

Personnel CeilingsThe Federal Workforce Restructuring Act of 1994 (Public Law 103-226) directed a Government-wide reduction of 272,900federal employees by 1999. The PTO is affected by this law. While the number of PTO employees will continue to growthrough fiscal year 1996, this growth is limited and will not meet expected workload increases, particularly in the patent andtrademark areas. In 1995 and 1996, the PTO proposes to reduce administrative positions and redirect examination supportstaff back to examination duties. These measures still do not address the underlying problem—by fiscal year 1999 the PTOwill be short almost 1,400 positions assuming continued growth in patent and trademark application filings and maintenance ofcurrent methods of doing business.

In response to this long-term outlook, PTO management and employees are undertaking an aggressive agenda toreengineer and automate our current processes. In 1994, reengineering reviews began for the Trademark Trial and AppealBoard, the entire trademark examination process, patent pre-grant publication (PGPub) initiatives, and the PTO budgetformulation and cost management process. Efforts are currently underway to reengineer the patent examination process.

Redirection of PTO FundsWith the enactment of the Omnibus Budget Reconciliation Act of 1990 (OBRA, Public Law 101-508), the PTO becametotally funded through the sales of our products and services. This was accomplished through imposing a 69 percentincrease in patent fees. Initial legislation required that fee surcharges be deposited into a special fund, from which theCongress is to appropriate funds equal to those deposits. Subsequent pieces of legislation removed the reference to a specificsurcharge of 69 percent, requiring the PTO to deposit exact amounts of surcharges, and extending the surcharge throughthe end of fiscal year 1998.


Due to declining funds allotted to the PTO’s appropriations subcommittees of the House and the Senate, thesubcommittees have failed to appropriate back to the PTO like amounts deposited into the fee fund. In fiscal year 1994,$14.7 million was withheld from the PTO. In 1995, $24.7 million will also be withheld. Total withholdings from fiscalyears 1992 to 1995 will amount to $59.8 million, or over 11% of the amount deposited, as shown in the following table:

(dollar amounts in thousands)Fiscal Surcharge Surcharge Surcharge Cum. Annual Cum.Year Deposit Appn. Withheld Variance Var. (%) Var. (%)

1991 $99,307 $99,307 $0 $0 0.00 0.001992 95,000 86,894 8,106 8,106 8.53 4.171993 99,000 86,672 12,328 20,434 12.45 6.971994 103,000 88,329 14,671 35,105 14.24 8.861995 107,000 $82,324 $24,6761 $59,781 23.06 11.881996 111,0001997 115,0001998 $119,000

(Note: Numbers in italics indicate deposits required by Public Law 102-204 for the fiscal years 1996-1998 period.)

Proposals to resolve this problem in fiscal year 1994 and fiscal year 1995 were not successful. Our fiscal year 1995appropriation was further reduced when Congress directed that $6 million of the $82.3 million in fee surcharges is availableonly for the acquisition of a high performance computing capability. If the PTO continues to experience this trend inappropriation reductions, the PTO can expect to see reductions of approximately $32 million, $40 million, and $48 millionin fiscal years 1996, 1997, and 1998, respectively. These reductions will hinder the PTO from providing the quality ofservice our customers deserve, will force our customers to pay for other agencies’ programs, and will penalize aconstituency that plays a vital role in building our nation’s strong economic base.

Patent Pre-Grant PublicationOn August 16, 1994, Secretary of Commerce Ronald H. Brown and Japanese Ambassador Takakazu Kuriyama signedLetters of Agreement that insured American inventors faster patent applications processing in Japan and overall improvedprotection for U.S. intellectual property rights owners. Under the terms of this agreement, the Japanese Patent Office will:(1) By April 1, 1995, end the practice of allowing third parties to oppose a competitor’s patent before it is granted. (2) ByJanuary 1996, establish an accelerated patent examination procedure that will enable applicants to obtain disposition of theirpatent applications within 36 months upon request. (3) By July 1, 1995, end the practice of awarding dependent patentcompulsory licenses, which can force patent holders to license the use of their technology to competitors, limiting theirexclusive rights to their inventions.

In return, the PTO agreed to publish patent applications 18 months after the first effective filing date beginning January 1,1996, and agreed to expand the reexamination proceedings to allow for greater participation by third parties. To prepare forthe pre-grant publication (PGPub), the PTO is currently applying business process reengineering techniques to create a pre-grant publication system. Groups of PTO employees worked throughout the summer and fall of 1994, to lay out strategiesfor implementation and operations. Additional expenditures incurred for PGPub will be offset entirely by fees. The PTOwill implement the PGPub system by January 1, 1996.

As a result of these activities, the PTO decided to postpone implementation of the Patent Application Management (PAM)system until after implementation of PGPub. The PAM system proposes the electronic processing of patent applicationsfrom receipt through examination to publication. The reasons for this decision were twofold. First, the agency will nothave sufficient resources in 1995 to implement both systems, and second, the experience gained by the implementation ofPGPub will serve as a learning tool and benchmark for PAM.

1 Within the $24,676,000 of funds withheld, $676,000 represents the PTO share of administrative savings imposed upon the Departmentof Commerce.


A MESSAGE FROM THECHIEF FINANCIAL OFFICER —Bruce A. Lehman, Assistant Secretary of Commerce and Commissioner of Patents and Trademarks, hascommunicated his desire to create a world class organization where quality is customer satisfaction. Such anorganization requires a financial management philosophy that is also centered upon quality and customersatisfaction. To this end, I envision an environment where program and financial managers work together toachieve an optimum balance between efficiency and effectiveness in the delivery of products and services tosatisfied customers; where accurate and timely financial information is an integral part of program delivery anddecision-making; where financial managers are valued members of the management team; and where the public,members of Congress, and others are confident that assets are safeguarded and used wisely, and where operatingresults are reported accurately.

Specific accomplishments have been realized as these plans are put into practice. During the reorganization, aComptroller position was created to provide enhanced leadership in the financial arena. Continuing professionaleducation programs were implemented for accountants and budget analysts. Other financial staff membersenrolled in business and automation programs offered through our PTO University.

Progress continues on the automation front towards my goal of an integrated financial management system thatprovides accurate, timely, and accessible information. Computer assisted design tools are being used to redevelopour revenue accounting and management system. Pilot testing of electronic commerce capabilities and phasedimplementation of a state-of-the-art procurement system are under way. Other initiatives include the develop-ment of an enhanced fee and cost management system, the implementation of a new travel subsystem, and thedevelopment of unit cost information for our products and services.

As the Chief Financial Officer of the Patent and Trademark Office, I am committed to strong accountability forsound financial performance. Thus, I am pleased to convey that the Office of the Inspector General of theDepartment of Commerce has rendered an unqualified opinion on our Financial Statements for fiscal year 1994.These include the Statement of Financial Position which indicates that assets grew by 34 percent to $337 milliondollars while liabilities increased by 16 percent to $235 million; the Statement of Operations and Changes in NetPosition which depicts total revenues of $544 million for fiscal year 1994 and corresponding expenses of $485million; the Statement of Cash Flows which shows the sources and uses of our funds; and the Statement ofBudgetary Resources and Actual Expenses which reconciles our actual expenditures to our budgeted resources.

Bradford R. HutherAssociate Commissioner and Chief Financial Officer


LIMITATIONS

Pursuant to the requirements of the Chief Financial Officer’s Act of 1990, the financial statements which followthe financial review have been prepared to report the financial position and results of operations of the Patentand Trademark Office (PTO). The fiscal year 1994 financial statements consist of the Statement of FinancialPosition; Statement of Operations and Changes in Net Position; Statement of Cash Flows; and the Statement ofBudgetary Resources and Actual Expenses. The following limitations apply to the preparation of the fiscal year1994 financial statements:

While the statements are prepared from the books and records of the entity in accordance with theformats prescribed by the Office of Management and Budget (OMB), the statements vary from thefinancial reports used to monitor and control budgetary resources which are prepared from the samebooks and records.

The statements should be read with the realization that they are for a sovereign entity, that liabilitiesnot covered by budgetary resources cannot be liquidated without the enactment of an appropriation,and that the payment of all liabilities other than contracts can be abrogated by the sovereign entity.


FINANCIAL REVIEWDuring the first part of this century, the Patent and Trademark Office (PTO) was virtually self-supporting. As the centuryprogressed, fee receipts, as a percentage of operating costs, declined substantially. By 1982, only 23 percent of totaloperating costs were offset by fee recoveries. On August 27, 1982, the Patent and Trademark Authorization Act wassigned. This act provided for a growing recovery of operating costs from fee income and allowed the PTO to retain the feeincome as offsetting collections.

The most recent Congressional act to impact the user fee-funded environment was the Omnibus Budget Reconciliation Act(OBRA) of 1990. Statutory patent fees were increased by 69%. The PTO received only nominal appropriations fromgeneral taxpayer revenues in fiscal year 1992. With the start of fiscal year 1993 and as stipulated in the OBRA, fundingfrom such appropriations ceased completely. All operating costs are now funded by the collection of user fees. Thesecollections have risen from $413 million in 1992 to almost $544 million in 1994.

This is the third annual financial statement prepared in response to the requirements of the Chief Financial Officer’s Act of1990. These statements have been compiled in accordance with guidance issued by the Office of Management and Budgetand the Department of Commerce.

During 1994, the Office of Inspector General (OIG) performed an audit on the Statement of Financial Position for fiscalyear 1993 and rendered an unqualified opinion on this statement. In their letter to the Chief Financial Officer, the OIGmade recommendations for improving internal controls and promoting operating efficiencies. Actions have been initiatedby the PTO to implement these recommendations.

TRENDS IN INCOME AND EXPENSESUser fees are the source of all revenues earned by the Patent and Trademark Office (PTO). Customers pay fees in advanceof the products and services to be received. A broad spectrum of products and services are provided and sold to the generalpublic, and individual fees are assessed accordingly. Fee collections have continued to climb as the demand for PTOproducts and services has increased. This has caused the PTO to have unusually large year end balances in our FundBalance with Treasury; Net Position; and Excess of Revenues and Financing Sources Over Total Expenses. These balancesare attributable to several factors.

Incoming workloads (or orders for products and services) have exceeded planned levels. In fiscal year 1994, new patentapplications (utility, plant, reissue and design applications) were planned at 193,500. The actual number of new applicationsreceived in 1994 was 201,554, which was four percent higher than projected. A similar situation exists in the trademark areawhere new applications exceeded plan by 7,376 or 5 percent in fiscal year 1994.

The PTO also collects fees for the maintenance of issued patents over the 17 year life of the patent. Maintenance fees arecollected in three stages. Maintenance fees were planned based upon an anticipated renewal rate of 75 percent at the firststage (at the end of the third year after a patent is issued); 50 percent at the second stage (at the end of the seventh year after apatent is issued); and 25 percent at the third stage (at the end of the eleventh year after a patent is issued). In fiscal year 1994,the PTO was just beginning to receive the full effects of the third stage renewal. Actual renewal rates were higher thanplanned: for the first stage, 76 percent versus 75 percent; for the second stage, 54 percent versus 50 percent; and for thethird stage, 34 percent versus 25 percent. The PTO will continue to refine its estimates, but the decision to renew a patentor not is entirely up to the patent owner and is thus not under the control of the PTO.


The net result of higher than planned incoming workloads and payment of patent maintenance fees resulted in feecollections in excess of plan. These amounts totaled $28.2 million in fiscal year 1994. The good news, of course, is that ourbusiness is booming. The reality of the situation is that the PTO is often unable to immediately respond to increasedbusiness, as our still largely manual processes rely upon trained and experienced patent examiners and trademark attorneys,the majority of whom are hired as recent college and university graduates. Thus, from one year to the next, advanced feepayments may be carried over to the next year while the PTO expands its operational capacity to address growinginventories of unexamined patent and trademark applications.

Also included in the year end balances are fees that have been collected but are not available for the PTO’s use. TheOmnibus Budget Reconciliation Act of 1990, as amended in 1993, imposed a surcharge upon specific patent fees. Thesesurcharges, to be collected by the PTO and deposited to the Treasury, are subject to appropriations by the Congress. Infiscal year 1994, the PTO deposited $103.0 million in surcharge fees. The Congress appropriated $88.329 million. Thedifference, $14.671 million, was not made available to the agency.

The fiscal year 1995 budget request was similarly reduced by the Congress. In addition to withholding $24.7 million fromdeposits of surcharge fees, the Congress also earmarked funds for specific projects and enacted reductions for administrativeand other savings. The total changes to the PTO budget request for fiscal year 1995 total $36.2 million. To address thesechanges, the PTO will apply balances from fiscal year 1994. In addition, the PTO is planning to implement an agreementsigned by the Secretary of Commerce with the Government of Japan in which, in return for concessions to US inventorsfiling patent applications in Japan, the PTO has agreed to the publication of patent applications within 18 months of theearliest filing date. Development of this pre-grant publication system is estimated to cost $8.0 - $10.0 million in fiscal year1995. Finally, remaining balances could be used in fiscal year 1995 for automation infrastructure improvements and for theacquisition of business reengineering support required for the streamlining of PTO operations.

PTO is a provider of services, and, as such, personnel costs represent the single greatest expense. In fiscal year 1994, salariesand benefits accounted for 62 percent of operating expenses. Investments in new automation technology are alsocontinuing to increase as some processes are transformed from paper-based to electronic systems. One of PTO’s largestautomation efforts is the deployment of the Automated Patent System (APS). A portion of the costs associated withdeploying the APS are capitalized and will be depreciated over the useful life of the system. As a result, the Statement ofOperations includes all APS costs expensed in fiscal year 1994 and the annual depreciation recognized on the capitalizedassets.

Trends in Income & Expenses

Revenue includes restricted Surcharge FeesNet Margin includes restricted Equity


CHANGES IN PRINCIPAL ACCOUNTSThe bulk of the assets managed by the PTO are comprised of cash and capital equipment. This equipment includeshardware, software, and assets under capital lease. To expedite the collection and deposit of cash assets, various mechanismsare used which provide customers with several options for remitting fees. These include payment by mail, payments byelectronic transfer, and payments to cashiers located in the PTO office complex.

Customers may also establish deposit accounts with the PTO. These monies are paid to the PTO in anticipation of afuture demand for services. When a service request is received from a customer maintaining a deposit account, theappropriate fee is deducted from the pertinent account. Monthly statements are provided to deposit account customers.

A comparison of selected ending balances for fiscal years 1992 through 1994, as reflected in the Statement of FinancialPosition, is displayed in the following charts. The graphs presented do not display ending balances by line item. Also, it isimportant to note that the restricted fund balances and equity segments associated with patent surcharge fees are notavailable for use without additional appropriations by the Congress.

FUND BALANCES WITH TREASURYinclude available and restricted amounts. Funds which arerestricted include advance payments by customers andsurcharge fees which were collected but not appropriatedfor use. At the end of fiscal year 1994, available fundbalances were $217 million, an increase of about 36 percentabove 1993. For the same period, funds which wererestricted increased by 41 percent to a total of $68 million.Approximately $102 million of the available balances areearmarked for the payment of outstanding obligations.

PROPERTY AND EQUIPMENT (NET)increased to a balance of $51 million on September 30,1994. This balance is stated at net book value, which is theoriginal acquisition cost of $108 million less the totalaccumulated depreciation of $57 million. The changeresulted from the continuing implementation ofautomation plans.

ACCOUNTS PAYABLEbalances shown include Federal and non-Federal accountspayable. These are monies owed for goodsand services that have been received but for whichpayment has not yet been made. At the end of the 1994fiscal year, payments due to other Federal agencies were $4million and $25 million was owed tonon-Federal entities.


DEPOSIT ACCOUNTSare maintained by the PTO as a service to our customers.The associated liability results from advance paymentsmade by customers in anticipation of a future demand forservices. At the end of fiscal year 1994, the total liabilitywas $32 million. There was a slight increase in the balanceas the result of a net increase in the number of accounts aswell as the amount of funds deposited by customers.

DEFERRED REVENUEresults from advance payments which are made bycustomers and are recorded as a liability until a particularservice is rendered. Fees which are remitted with initialapplications are recorded as deferred revenue until theprocessing of the application actually begins. An increase inapplications received as well as a processing backlogresulted in an increase in the deferred revenue as ofSeptember 30, 1994.

CAPITAL LEASE LIABILITIESrepresent future payments owed for capital lease transac-tions. The lease total for future payments decreased by 54percent due to the purchase of previously leased hardwareused in connection with the Automated Patent System(APS). Most of the APS leases have a duration of three tofive years. Also included in this account balance are leasesfor reproduction equipment, which usually span a periodof three to four years. With the exception of reproductionequipment, the current policy of the PTO is to purchaserather than lease capital assets.


INVESTED CAPITAL is the book value of capitalized fixed assets which were purchased with appropriations fromgeneral taxpayer revenue. Since the PTO is no longer funded from taxpayer revenues, this account balance will decreaseeach year as depreciation expense is realized. The balance in this account was $8 million onSeptember 30, 1994, a decrease of 20 percent from the balance of $10 million on September 30, 1993.

CUMULATIVE RESULTS OF OPERATIONS represent the total unrestricted net operating gain which has beenrealized over the years. The balance in this account does not include surcharge fees which have been earned but notappropriated for use. The equity position associated with the surcharge fees is shown separately. This account does notreflect charges for future funding requirements of approximately $24 million and outstanding purchase orders valued at$102 million.

SURCHARGE FEE EQUITY is a segment of net position. This portion of the equity position is segregated due torestrictions associated with the availability of the surcharge fees. Although these fees were earned, additional action byCongress is required to make these balances available for use by the PTO. Total surcharge fee equity reached $35 million atthe end of FY 1994.

FUTURE FUNDING REQUIREMENTSinclude annual leave accrued but not used as well as futurelease payments. The decrease of $10 million, or 30percent, was mainly due to lease buyouts, and reduction inthe number of new capital lease arrangements in FY 1994,and reductions in the outstanding balance of futurepayments for existing capital leases.

The above chart does not reflect future funding requirements which decrease equity


SIGNIFICANT ACTIONS, ACCOMPLISHMENTS AND RESULTS

FINANCIAL MANAGEMENTIn June 1993, the Office of Management and Budget (OMB) recommended quantitative indicators tomonitor progress towardssimproved financial management. The following chart depicts the goals or targetperformance established by OMB for FY 1994 and the performance of the PTO during that period.

MEASURE TARGET PERFORMANCE PTO PERFORMANCEPercent of Timely 95% 99%Vendor PaymentsPercent of Payroll by 90% 95%Electronic TransferPercent of Agency 95% 100%Locations Fully ReconciledTimely Posting of 30 days 20 daysInter-agency ChargesTimely Reports to 95% 100%Central AgenciesTimely Travel Payments 15 days 4 daysAvg. Processing TimeAudit Opinion on Unqualified UnqualifiedFY 94 Financial StatementMaterial Weaknesses None NoneReported by Auditor

FINANCIAL SYSTEMS: Prior to October 1, 1991, the majority of the accounting activities were performed by anadministrative center within the National Oceanographic and Atmospheric Administration (NOAA). At the beginning ofFY 1992, the PTO implemented the Federal Financial System (FFS) and assumed responsibility for all accounting records.Software and hardware support for the core system are supplied via a cross-servicing arrangement with the U. S. GeologicalSurvey of the Department of the Interior.

Other improvements and planned enhancements to PTO’s financial management system include: 1) a major enhancementto the procurement subsystem; 2) improvements to the travel subsystem; 3) the redevelopment of the revenue accountingsystem; 4) a re-engineering of the budget process; 5) the development of a system to monitor Position and Full TimeEquivalent (FTE) levels; 6) an interface of the property subsystem to the core financial system; and 7) the development ofElectronic Commerce capabilities.


MANAGEMENT CONTROLS: For fiscal year 1994, the PTO provided reasonable assurance of compliance with theprovisions of the Federal Managers Financial Integrity Act. As required by OMB circular A-130, weaknesses in existingsubsystems were identified in prior years and reported to the Department of Commerce. The implementation ofcompensating management controls allowed the PTO to provide the assurance referenced above. No additional materialdeficiencies were identified or reported in FY 1994, and progress continues to correct weaknesses identified in earlier years.Reported weaknesses and anticipated dates for full correction follow.

SECTION 2 MATERIAL CORRECTIONWEAKNESSES DATE

System Security Weaknesses in theCash Receipts/Deposit AccountsSystem (A Privacy Act Records System) 1995

SECTION 4 MATERIAL NON CONFORMANCE

Violation of Financial InformationStandards in Cash Receipts/DepositAccounts System 1995


DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICESTATEMENT OF FINANCIAL POSITIONAs of September 30, 1994 and 1993

ASSETS 1994 1993Entity Assets:

Intragovernmental Assets:Fund Balance With Treasury (note 2) $284,206,145 $207,484,842Advances and Prepayments 937,610 936,230

Governmental Assets:Accounts Receivable, Net 499,227 76,246

Property and Equipment, Net (note 3) 51,436,575 42,195,340

Total Entity Assets $337,079,557 $250,692,658

LIABILITIESLiabilities Covered by Budgetary Resources:

Intragovernmental Liabilities:Accounts Payable $ 3,993,132 $ 1,895,044

Governmental Liabilities:Accounts Payable 24,991,865 17,362,219Accrued Payroll & Benefits 18,398,354 15,213,719Actuarial Liability (note 4) 2,356,889 0Customer Deposit Accounts 32,421,236 27,400,204Deferred Revenue (note 5) 129,095,599 106,315,092

Total Liabilities Covered by Budgetary Resources: 211,257,075 168,186,278

Liabilities not covered by Budgetary Resources:Governmental Liabilities:

Capital Leases (note 6) 9,435,323 20,410,156Accrued Annual Leave 14,205,493 13,125,630

Total Liabilities not Covered by Budgetary Resources 23,640,816 33,535,786

Total Liabilities $234,897,891 $201,722,064

NET POSITIONBalances:

Invested Capital $ 8,327,877 $ 10,444,239Cumulative Results of Operations 82,389,606 51,628,142Surcharge35,104,999 20,433,999Future Funding Requirements (23,640,816) (33,535,786)

Total Net Position 102,181,666 48,970,594

Total Liabilities and Net Position $337,079,557 $250,692,658

The accompanying notes are an integral part of these statements.


DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICESTATEMENT OF OPERATIONS AND CHANGES IN NET POSITIONFor the years ended September 30, 1994 and 1993

1994 1993(unaudited)

REVENUES AND FINANCING SOURCESRevenues from Sales of Goods and Services

To the Public $541,593,879 $488,417,591Intragovernmental 11,338 185,937

Appropriated Capital Used (note 1) 2,116,362 4,920,078

Total Revenues and Financing Sources 543,721,579 493,523,606

EXPENSESProgram or Operating Expenses (note 7) 469,147,924 444,616,546Depreciation and Amortization 16,889,332 12,249,743Change in Actuarial Liability (note 4) (604,882) 0

Total Expenses 485,432,374 456,866,289

Excess of Revenues and FinancingSources Over Total Expenses $ 58,289,205 $ 36,657,317

Net Position, Beginning Balance, as Previously Stated $ 48,970,594 $ 17,233,355Cumulative Effect of a Change in Accounting

Principle (note 4) (2,961,771) 0

Net Position, Beginning Balance, as Restated 46,008,823 17,233,355Excess of Revenues and Financing Sources Over

Total Expenses 58,289,205 36,657,317Decrease in Invested Capital (2,116,362) (4,920,078)

Net Position, Ending Balance $102,181,666 $ 48,970,594



DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICESTATEMENT OF CASH FLOWS (INDIRECT)For the years ended September 30, 1994 and 1993


CASH FLOWS FROM OPERATING ACTIVITIES:Excess of Revenues and Financing

Sources over Total Expenses $ 58,289,205 $ 36,657,317

Adjustments Affecting Cash Flow:Appropriated Capital Used (2,116,362) (4,920,078)(Increase) Decrease in Accounts Receivable (422,981) 731,813Increase in Other Assets (1,380) (513,782)Increase in Accounts Payable 9,727,734 12,665,908Increase (Decrease) in Other Liabilities 33,343,063 (10,578,574)(Decrease) Increase in Capital Lease Liability (10,974,833) 4,557,939Depreciation and Amortization 16,889,332 12,249,743Other Unfunded Expenses 1,079,863 311,506Cumulative Effect of Change in Accounting

Principle (note 4) (2,961,771) 0

Total Adjustments 44,562,665 14,504,475

Net Cash Provided by Operating Activities 102,851,870 51,161,792

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of Property and Equipment (26,130,567) (18,265,033)

Net Cash Used in Investing Activities (26,130,567) (18,265,033)

Net Cash Provided by Operating andand Investing Activities 76,721,303 32,896,759

Fund Balances with Treasury and Cash,Beginning 207,484,842 174,588,083

Fund Balances with Treasury and Cash,Ending $284,206,145 $207,484,842



DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICESTATEMENT OF BUDGETARY RESOURCES AND ACTUAL EXPENSESFor the year ended September 30, 1994

BUDGET ACTUAL

OBLIGATIONS

Resources Direct Reimbursed Expenses

Salaries & Expense/Surcharge $569,159,702 $88,329,000 $442,556,936 $485,432,374

Budget Reconciliation:Total Expenses $485,432,374Add:

Capital Acquisitions 26,130,567Capital Lease Payments 11,468,295Change in Actuarial Liability 604,882

Less:Fiscal Year 1994 Capital Lease Acquisitions 505,778Depreciation and Amortization 16,889,332Annual Leave Expense 1,079,863Other 29,805

Accrued Expenditures 505,131,340Less: Reimbursements (443,964,722)

Accrued Expenditures, Direct $61,166,618



Notes to the Financial Statements

NOTE 1. Summary of Significant Accounting Policies

Basis of PresentationAs required by the Chief Financial Officers Act of 1990, these financial statements have been prepared to report the financial position andresults of operations of the Patent and Trademark Office (PTO) of the United States. The books and records of the PTO have served asthe source of the information contained herein. The Financial Statements have been prepared in accordance with the guidance specified bythe Office of Management and Budget (OMB) in Bulletin 94-01, as well as the accounting policies of the PTO; therefore, they may differfrom other financial reports submitted pursuant to OMB directives for the purpose of monitoring and controlling the use of PTO’sbudgetary resources.

Reporting EntityThe Patent and Trademark Office is a program of the U.S. Department of Commerce (DOC) which administers the Nation’s patent andtrademark laws. Since the passage of the Omnibus Budget Reconciliation Act of 1990 (OBRA), the program has been funded almostentirely by user fees. Prior to fiscal year 1993, the appropriated funds from general taxpayer revenue gradually decreased until PTObecame fully fee funded in fiscal year 1993. In fiscal years 1993 and 1994, all revenues were derived from the payment of user fees whichare appropriated by Congress for use by the PTO. The bulk of the fees collected are offsetting collections which are retained by the PTOuntil expended; however, the surcharge imposed on statutory patent fees with the enactment of the OBRA constitute offsetting receipts.These offsetting receipts are deposited into a restricted account at the U.S. Treasury. The PTO is only authorized to use monies from thisaccount to the extent appropriated by Congress. Thus, the U.S. Treasury makes these funds available to the PTO by the issuance of awarrant each month to the extent such funds were authorized for use. The excess monies are not available to the PTO and are retained ina restricted receipt account by the U.S. Treasury. Any authorized funding which is not expended during a given fiscal year is carriedforward for use in the following fiscal year.

The accompanying financial statements include the accounts for salaries and expense (13X1006), surcharge (13X5127), and customerdeposits (13X6542) appropriations, which are under the control of the PTO. The PTO has no lending or borrowing authority.

Budgets and Budgetary AccountingIn fiscal years 1993 and 1994, all funding was received through the collection of user fees. User fee rates are established by rule and law.

Surcharges on patent statutory fees were established by the OBRA. Subsequent pieces of legislation removed the reference to a specificsurcharge of 69%, required the PTO to deposit exact amounts of surcharges, and extended the surcharge through the end of fiscal year1998. These represent offsetting receipts and are available to the entity only to the extent appropriated by Congress. All surcharge feescollected are recorded as revenue. However, any surcharge fees collected by PTO, but not appropriated by Congress for use, aremaintained by the U.S. Treasury as restricted funds.

Fees other than the surcharge fees referenced above are offsetting collections and are available to the PTO until expended. Fundsauthorized but not used in a given fiscal year are carried forward for use in future periods.

Basis of AccountingTransactions are recorded on the accrual basis of accounting as well as on a budgetary basis. Under the accrual method, revenues arerecognized when earned, and expenses are recognized when a liability is incurred, without regard to the receipt or payment of cash.Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds. The accompanying financialstatements are presented on the accrual basis of accounting.

Revenues and Other Financing SourcesIn fiscal years 1993 and 1994, the majority of revenues were derived from the collection of user fees. Appropriations expended in prioryears for the purchase of property and equipment are recognized as revenues as the assets are consumed in operations.

Although not material in amount, some financial gifts and gifts-in-kind are received from anonymous donors. Most gifts-in-kind are usedfor official travel to further the attainment of the mission and management objectives of the PTO. The results of these transactions arenot reflected in the PTO statements, but are included in the consolidated Gifts and Bequests Fund statements prepared by the Departmentof Commerce.

Advance payments which are made by customers are recorded as a liability until a particular service is rendered. Fees which are remittedwith initial applications are recorded as deferred revenue until the processing of the application actually begins.

Funds with the U.S. Treasury and CashCommercial bank accounts are maintained to deposit revenues collected. All monies maintained in such accounts are transferred to theFederal Reserve Bank on the next business day following the day of deposit. In addition, some customer deposits are wired directly to theFederal Reserve Bank. All banking activity is conducted in accordance with the directives issued by the Financial Management Service of


the U.S. Treasury Department. With the exception of those which are restricted, funds with the U.S. Treasury and cash are available topay current liabilities and to finance duly authorized purchases. All disbursements are processed by the Philadelphia Regional FinanceCenter of the U.S. Treasury Department. Finally, cash balances held outside the U.S. Treasury Department are not material and are usedas imprest funds to facilitate small purchases, local travel, and emergency salary advances.

Property and EquipmentThe buildings in which the PTO operates are leased from private concerns by the General Services Administration (GSA). Long-termleases are negotiated by GSA and appropriate rent charges are levied. The rental rates assessed by GSA and paid by the PTO approximatethe market rates for similar commercial properties.

Automated data processing software purchased “off the shelf” with an estimated service life of two years or greater is capitalized when thecost exceeds $25,000.

The costs for developing APS software are capitalized when incurred for creating the detailed design, coding, and final testing of thesoftware. Software costs are divided into two major categories: Text Search and Classified Search and Image Retrieval (CSIR).

Bulk purchase costs of furniture, with an estimated service life of two years or greater are capitalized when the total monetary value of thepurchase order/delivery order equals or exceeds $50,000 (including shipping and installation).

APS Hardware, equipment and other assets with an individual unit cost of $5,000 or greater (including shipping and installation) and anestimated service life of two years or greater is capitalized. In instances other than those listed above, the entire cost is recorded as anexpense upon receipt of the equipment or other asset, with the following exceptions:

(1) The total amount of the order, including shipping and installation, is capitalized if the equipment procured is made via a majorcontract.

(2) The total amount of the order, including shipping and installation, is capitalized if the procurement represents the initial purchaseof equipment in connection with the installation of a major system.

(3) If the procurement represents the purchase of additional items for an existing major system, only those items with an individualunit cost of $5,000 or greater will be capitalized.

Depreciation is calculated using the straight line method over the following service lives: APS equipment 3-10 years, APS software 3-11years, Furniture 5 years, ADP equipment 3 years, ADP software 3 years, Equipment 3 years and Assets under Capital Lease 3-7 years.

Advances and PrepaymentsPayments made in advance of the receipt of goods and services are recorded as prepaid charges at the time of prepayment and recognizedas expenses when the related goods and services are received. PTO rendered prepayments to the U.S. Geological Survey for approxi-mately $470,000 and $936,000 in fiscal years 1994 and 1993, respectively. These prepayments were made in anticipation of services to beprovided under a cross-service agreement relating to the Federal Financial System.

LiabilitiesLiabilities represent the amount of monies or other resources that are likely to be paid by the PTO as the direct result of an event that hasalready occurred. All such liabilities recognized in fiscal years 1994 and 1993 have been fully funded except for the accrual for annual leaveand the commitments under capital leases. However, no liability can be paid by the PTO unless appropriate funding is available. Also,liabilities of the PTO arising from other than contracts can be abrogated by the government acting in its sovereign capacity.

Annual, Sick, and Other LeaveAnnual leave is accrued as it is earned, and the accrual is reduced as leave is taken. An appropriate adjustment is made at the end of eachfiscal year to ensure that the balance in the accrued annual leave account reflects current pay rates. To the extent current or prior yearfunding is not available to cover annual leave earned but not taken, funding will be obtained from future financing sources.

Sick leave and other types of non-vested leave are expensed as taken. Any liability for sick leave that is accrued by an individual but nottaken is transferred to the Office of Personnel Management upon the retirement of that individual.

Retirement PlanPTO employees participate in the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). TheFERS was established by the enactment of Public Law 99-335. Pursuant to this law, most employees hired after December 31, 1983, areautomatically covered by FERS and Social Security. Employees hired prior to January 1, 1984, can elect to join either FERS and SocialSecurity or remain in CSRS.

For those employees covered by the CSRS, the PTO makes contributions equivalent to 7 percent of the employee’s pay. For thosecovered by the FERS, the PTO makes contributions equal to approximately 13 percent.All employees are eligible to contribute to a thrift savings plan. For those employees participating in the FERS, a thrift savings plan is


automatically established, and the PTO makes a mandatory one percent contribution to this plan. In addition, PTO makes matchingcontributions, ranging from 1 percent to four percent, for FERS eligible employees who contribute to their thrift savings plans. Nomatching contributions are made to the thrift savings plans established by CSRS employees.

FERS employees and certain CSRS reinstatement employees are eligible to participate in the Social Security Program after retirement. Inthese instances, the PTO remits the employer’s share of the required contribution.

The financial statements of the PTO do not report CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities, if any, whichmay be applicable to its employees. Such reporting is the responsibility of the Office of Personnel Management.

Comparative Data1993 Financial Statements were reclassified and restated to conform with the 1994 presentation.

NOTE 2. Fund Balance with Treasury and Cash

Fund Balance with Treasury and cash consisted of the following as of September 30:

Available Restricted 1994 1993

Appropriated Funds $216,664,910 $ 0 $216,664,910 $159,635,639Deposit Accounts 0 32,421,236 32,421,236 27,400,204Surcharge 0 35,104,999 35,104,999 20,433,999Cash 15,000 0 15,000 15,000

Total Fund Balances and Cash $216,679,910 $ 67,526,235 $284,206,145 $207,484,842

Deposit Account balances represent advance payments by customers for future services.

Surcharge represents fees earned but not available for use.

NOTE 3. Property and Equipment

Property and Equipment consisted of the following as of September 30, 1994:

Service Acquisition Accumulated Net BookLife Value Depreciation Value

(Years)

Classes of Fixed AssetsAPS Equipment 3-10 $ 39,795,517 $26,967,133 $12,828,384APS Software 3-11 19,471,225 10,018,233 9,452,992ADP Equipment 3 19,386,929 7,449,855 11,937,074ADP Software 3 1,558,658 850,975 707,683Equipment 3 3,390,787 759,600 2,631,187Assets Under Capital Lease 3-7 18,502,153 9,447,666 9,054,487Furniture 5 3,851,148 1,244,505 2,606,643APS Software in Progress 2,218,125 0 2,218,125

Total $108,174,542 $56,737,967 $51,436,575


NOTE 3. Property and Equipment - continued

Property and Equipment consisted of the following as of September 30, 1993:

Service Acquisition Accumulated Net BookLife Value Depreciation Value

(Years)

Classes of Fixed AssetsAPS Equipment 3-10 $20,886,962 $14,833,891 $ 6,053,071APS Software 3-11 17,833,812 7,974,355 9,859,457ADP Equipment 3 8,857,467 3,289,388 5,568,079ADP Software 3 1,341,742 409,608 932,134Equipment 3 299,885 192,284 107,601Assets Under Capital Lease 3-7 30,722,883 12,491,546 18,231,337Furniture 5 2,101,224 657,563 1,443,661

Total $82,043,975 $39,848,635 $42,195,340

NOTE 4. Actuarial Liabilities

The Federal Employees Compensation Act (FECA) provides income and medical cost protection to covered Federal civilian employeesinjured on the job, employees who have incurred a work-related occupational disease and beneficiaries of employees whose death isattributable to a job-related injury or occupational disease. Claims incurred for benefits for PTO employees under FECA are adminis-tered by the Department of Labor (DOL) and are ultimately paid by the PTO. These future workers’ compensation estimates weregenerated from an application of actuarial procedures developed to estimate the liability for FECA benefits. The actuarial liabilityestimates for FECA benefits include the expected liability for death, disability, medical, and miscellaneous costs for approved compensa-tion cases. The liability was determined using the paid losses extrapolation method calculated over the next 23-year period. This methodutilizes historical benefit payment patterns related to a specific incurred period to predict the ultimate payments related to that period.These annual benefit payments have been discounted to present value using the discount rate of 7% in year one and thereafter. Based oninformation provided by the Department of Labor, the Department determined that the estimated liability of the PTO as of September30, 1994 and 1993 was $2,356,889 and $2,961,771, respectively. In prior fiscal years, the PTO recorded these compensation benefits on acash basis. The PTO has recorded the estimated liability for claims incurred as of September 30, 1994, as the effect of a change inaccounting principle. The effect of the decrease in the estimated liability of $604,882 is reflected as a change in actuarial liability on theStatement of Operations and Changes in Net Position. These amounts are expected to be paid in future periods.

NOTE 5. Deferred Revenue

Deferred revenues represent fees received but not yet earned until the related service is provided. Two types of deferred revenues arerecorded. The first type results from checks received but not yet deposited. Unearned fees amounted to $40,499,742 and $23,097,015 asof September 30, 1994 and 1993, respectively.

The second type of deferred revenues relate to fees received on applications which underwent the initial processing phase but were notreviewed by a patent examiner or a trademark attorney. Revenues are recognized to the extent of costs incurred in the initial processingphase. The balance of the fees received is considered unearned and amount to $88,595,857 and $83,218,077 as of September 30, 1994 and1993, respectively.


NOTE 6. Leases

Capital Leases:

PTO has commitments under leases for reproduction, Automated Patent System (APS) and PTONET equipment. APS and PTONETleases are 60 months in duration and reproduction equipment leases are 36-48 months. The future payments due as of September 30 areas follows:

Fiscal Year 1994 1993

1994 $ 0 $ 8,272,3961995 4,652,986 7,045,0131996 3,476,712 3,934,1161997 2,617,115 2,713,9751998 555,291 497,8121999 8,400 0Total Future Lease Payments 11,310,504 22,463,312Imputed Interest 1,875,181 2,053,156

Total Capital Lease Liability $ 9,435,323 $ 20,410,156

Funded $ 0 $ 0

Unfunded $ 9,435,323 $ 20,410,156

Operating Leases:

The buildings in which PTO operates are leased by the General Services Administration (GSA), and PTO is charged rent intended toapproximate commercial rental rates. The majority of PTO’s lease agreements will expire in early fiscal year 1997. The amounts shownbelow for fiscal years 1997 through 1999 are estimates due to ongoing rent negotiations with GSA.

1994 1993 Fiscal Year (unaudited)

1994 $ 0 $ 43,326,0001995 42,340,000 45,035,0001996 46,600,000 48,349,3791997 (estimate) 48,900,000 01998 (estimate) 50,700,000 01999 (estimate) 52,500,000 0

Total Future Lease Payments $241,040,000 $136,710,379

Rent expense was $39,018,347 and $38,057,853 in fiscal years 1994 and 1993, respectively.


NOTE 7. Program/Operating Expenses

For the Years Ended September 30


Operating Expenses by Object Classification

Personal Services and Benefits $291,386,886 $266,850,328Travel and Transportation 830,595 648,496Rental, Communication and Utilities 46,070,894 45,589,600Printing and Reproduction 30,326,630 30,233,911Contractual Services 71,382,620 57,541,316Supplies and Materials 7,464,602 6,609,359Equipment not Capitalized 5,931,758 7,783,730Insurance Claims and Indemnities 13,785 12,000Other:

(a) Other services 6,356,131 19,207,716(b) Training 3,811,531 2,912,801(c) Maintenance and Repair 5,572,492 7,227,289

Total Expenses by Object Class $469,147,924 $444,616,546

NOTE 8. Commitments and Contingencies

A. Commitments

In addition to future lease commitments discussed in Note 6, PTO is committed under obligations for goods and services which havebeen ordered but not yet received (undelivered orders) at fiscal year end. Total undelivered orders for all PTO activities amounted to$102,380,157 and $82,109,985 as of September 30, 1994 and 1993, respectively.

B. Contingencies

In 1991, a contractor asserted a claim for $1.9 million on behalf of two of its equipment subcontractors. The basis of the claim is thatPTO’s failure to exercise contract options to purchase certain equipment constituted a breach of contract or an improper termination forconvenience. The contractor contends that the equipment leased was unique to the PTO procurement, and they have been unable to re-lease it. PTO will vigorously defend the case. A hearing was held in July 1994 before the General Services Board of Contract Appeals.The outcome of this litigation is not known at this time.

PTO is a party in various administrative proceedings, legal actions, and claims brought by or against it, which may ultimately result insettlements or decisions adverse to the federal government. Although the ultimate disposition of these proceedings is not presentlydeterminable, management does not expect that any liability that might ensue would be material to PTO’s financial statements.



INSPECTORGENERAL’S

REPORT

48

INSPECTOR GENERAL’S REPORT ON FINANCIAL STATEMENTS

Mr. Bruce A. LehmanAssistant Secretary of Commerce andCommissioner of Patents and TrademarksPatent and Trademark OfficeWashington, D.C.

We have audited the Statements of Financial Position of the Patent and TrademarkOffice (PTO) as of September 30, 1994 and 1993, and the Statements of Operationsand Changes in Net Position, Cash Flows, and Budgetary Resources and ActualExpenses for the year ended September 30, 1994. These statements are theresponsibility of the PTO’s management. Our responsibility is to express an opinionon these financial statements based on our audits. Our audit objective with respect toPTO’s Fiscal Year 1993 financial statements was limited to reporting on the Statementof Financial Position as of September 30, 1993.

We conducted our audits in accordance with generally accepted auditing standards;Government Auditing Standards, issued by the Comptroller General of the UnitedStates; and Office of Management and Budget Bulletin No. 93-06, Audits of FederalFinancial Statements. Those standards require that we plan and perform the audits toobtain reasonable assurance about whether the financial statements are free of materialmisstatements. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

As required by Office of Management and Budget Bulletin No. 94-01, Form andContent Of Agency Financial Statements, Note 1 to the Principal Statements describesthe accounting policies used by the PTO to prepare the financial statements, which is acomprehensive basis of accounting other than generally accepted accountingprinciples.

In our opinion, the Statements of Financial Position of PTO as of September 30, 1994and 1993, and the Statements of Operations and Changes in Net Position, Cash Flows,and Budgetary Resources to Actual Expenses for the year ended September 30, 1994,present fairly, in all material respects, the financial position of PTO as of September30, 1994 and 1993, and the results of its operations and changes in net position, its

49

cash flows, and budget and actual expenses for the year ended September 30, 1994, inconformity with the accounting policies described in Note 1.

Our audits were made for the purpose of forming an opinion on the PrincipalStatements. The information in the other sections of A Patent and Trademark OfficeReview is not a required part of the Principal Statements but is supplementaryinformation required by Office of Management and Budget bulletin No. 94-01, Formand Content of Agency Financial Statements. Such information has not beensubjected to the auditing procedures applied in the audit of the Principal Statementsand, accordingly, we express no opinion on it.

Frank DeGeorgeInspector General

William H. Pugh, DirectorFinancial Statements Division

February 10, 1995

50

INSPECTOR GENERAL’S REPORT ON INTERNAL CONTROL STRUCTURE

Mr. Bruce A. LehmanAssistant Secretary of Commerce andCommissioner of Patents and TrademarksPatent and Trademark OfficeWashington, DC

We have audited the Statement of Financial Position of the Patent and Trademark Office(PTO) as of September 30, 1994 and 1993, and the Statements of Operations and Changesin Net Position, Cash Flows, and Budgetary Resources and Actual Expenses for the yearended September 30, 1994, and have issued our report thereon dated February 10, 1995.

We conducted our audits in accordance with generally accepted auditing standards;Government Auditing Standards, issued by the Comptroller General of the United States;and Office of Management and Budget Bulletin No. 93-06, Audits of Federal FinancialStatements. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatements.

In planning and performing our audit of the financial statements for the year endedSeptember 30, 1994, we considered PTO’s internal control structure in order to determineour auditing procedures for the purposes of expressing our opinion on the financialstatements and to determine whether the internal control structure meets the objectivesidentified in the following paragraph. Our consideration included obtaining anunderstanding of the significant internal control structure policies and procedures andassessing the level of control risk relevant to all significant cycles, classes of transactions, oraccount balances; and for those significant internal control structure policies and proceduresthat have been properly designed and placed in operation, performing sufficient tests toassess more fully whether the controls are effective and working as designed.

The management of the PTO is responsible for establishing and maintaining an internalcontrol structure. In fulfilling this responsibility, estimates and judgments by managementare required to assess the expected benefits and related costs of internal control structurepolicies and procedures. The objectives of an internal control structure are to providemanagement with reasonable, but not absolute, assurance that transactions, including thoserelated to obligations and costs, are executed in compliance with laws and regulations thatthe Office of Management and Budget, entity management, or the Inspector General haveidentified as being significant for which compliance can be objectively measured and

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evaluated; funds, property, and other assets are safeguarded against loss from unauthorizeduse or disposition; transactions are properly recorded and accounted for to permit thepreparation of reliable financial reports in accordance with applicable accounting policies andto maintain accountability over the assets; and data that support reported performancemeasures are properly recorded and accounted for to permit preparation of reliable andcomplete performance information. Our evaluation of the controls for performanceinformation was limited to controls to ensure the existence and completeness of theinformation.

For the purpose of this report, we have classified the significant internal control structurepolicies and procedures in the following categories:

o Purchases/Cash disbursements.o Revenues/Cash receipts.o Payroll.o Budget.o General ledger and reporting.

Our consideration of the internal control structure included all of the categories listed above.

We noted certain matters involving the internal control structure and its operation that weconsider to be reportable conditions under standards established by the American Institute ofCertified Public Accountants and OMB Bulletin No. 93-06. Reportable conditions involvematters coming to our attention relating to significant deficiencies in the design or operationof the internal control structure that, in our judgment, could adversely affect the entity’sability to ensure that the objectives of the internal control structure, as previously defined, arebeing achieved.

We have summarized our internal control findings below. A letter dated March 10, 1995,transmitting our audit report to PTO, includes an attachment to our Report on InternalControl Structure which discusses each of the control weaknesses in more detail and providesspecific recommendations on actions PTO should consider taking.

Controls Over Property Should Be improved(Repeat Condition)

PTO has not completed its efforts to improve controls over property to ensure that it isproperly recorded and safeguarded on an ongoing basis. The balance per the subsidiaryledger maintained by the Office of Administrative Services is not reconciled to the capitalasset balance in the general ledger. The subsidiary ledger is inaccurate as acquisitions ofproperty through purchase or lease and disposals of property are not consistently reported to

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the Office of Administrative Services. In addition, physical count procedures currently in placedo not ensure that accurate and reliable information is reported to property management in atimely manner.

During fiscal year 1993, PTO’s Office of Finance hired a contractor to compile a subsidiaryledger and to propose the necessary adjustments to the general ledger. The Office of Finance,with the contractor’s assistance, performed a manual review of certain fiscal year 1994purchase documentation and proposed adjustments to ensure the accuracy of current yearadditions to this ledger. PTO is in the process of addressing the above issues and has created aproject team to determine a uniform process for the management of all personal property. Thisteam will also address the transmittal of pertinent documentation between PTO’s offices. PTOexpects to complete corrective actions by June 30, 1995.

The Finance Department Should Review General Ledger Coding(Repeat Condition)

PTO has not fully implemented the new procurement module that would require the Office ofFinance to review the accuracy of all general ledger coding of purchase transactions. Ourprocedures identified several inconsistencies or errors in the coding of purchases of goods orservices recorded in the general ledger. As a result, approximately $10.6 million of capitalassets that should have been capitalized in accordance with the DOC Handbook wereexpensed. In addition, approximately $17 million in transactions were misclassified betweenexpense accounts. In July 1994, the Office of Finance began reviewing the accuracy of generalledger coding for program offices using the new procurement module. Full implementation ofthis module is expected by September 30, 1995.

Cash Receipts Should Be Deposited Timely(Repeat Condition)

PTO continues to have delays in the deposits of its cash receipts. In July 1994, PTOimplemented a reorganization that separated the processing of patent and trademark receipts.At September 30, 1994, the elapsed times from the receipt of funds with an application untiltheir deposit with commercial banking institutions was approximately 13 days and 2 months forpatents and trademarks, respectively. These were an increase over the 11 day lag time for bothpatents and trademarks at September 30, 1993. Unearned fees for checks not depositedamounted to approximately $40 million and $23 million as of September 30, 1994 and 1993,respectively.

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A new revenue processing system, the Revenue Accounting Management System, is expectedto be implemented by December 1995. This system is expected to solve the problem ofuntimely deposits.

********A material weakness is a reportable condition in which the design or operation of the specificinternal control structure elements does not reduce to a relatively low level the risk that errorsor irregularities in amounts that would be material in relation to the financial statements beingaudited or material to a performance measure or aggregation of related performancemeasures may occur and not be detected within a timely period by employees in the normalcourse of performing their assigned functions.

Our consideration of the internal control structure would not necessarily disclose all mattersin the internal control structure that might be reportable conditions and, accordingly, wouldnot necessarily disclose all reportable conditions that are also considered to be materialweaknesses as defined above. However, we believe none of the reportable conditionsdescribed above is a material weakness. We noted certain other matters, while not consideredto be reportable conditions, that we felt warranted inclusion in this report due to theirsignificance and sensitivity. We have summarized these matters below. A letter dated March10, 1995, transmitting our audit report to PTO, includes an attachment to our Report onInternal Control Structure which discusses each of the control weaknesses in more detail andprovides specific recommendations on actions PTO should consider taking.

Physical Count Procedures for APS Assets Should Be Improved

PTO’s planning and controls over the physical count of APS assets were inadequate. Theinventory listing used to perform the asset count was inaccurate and did not agree to thesubsidiary ledger. PTO and contractor equipment were commingled and PTO personnel wereunable to identify the equipment owned by PTO. In addition, count teams were not givenadequate instructions. As a result inconsistent information was reported. Significantresources were required to compile and reconcile inventory information with the APSsubsidiary ledger.

Controls over Thrift Savings Plan Contributions Should Be Improved(Repeat Condition)

In our previous audit we found that PTO did not begin the required contribution of I percentof gross pay to the Thrift Savings Plan in the correct period and sometimes began it only aftersignificant delays. PTO’s Office of Human Resources has initiated a review of all employees

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who are currently participating in the Thrift Savings Plan to identify and correct these errors.This review is expected to be completed by September 30, 1995. Subsequent to the issuanceof our previous audit report, the Office of Human Resources developed and implementedprocedures to prevent errors from occurring in the future. These procedures have not yetbeen documented in their standard operating procedures manual.

********We have reviewed our findings and recommendations with PTO’s financial management andhave incorporated their comments as appropriate. Management concurs with our findingsand recommendations and will provide an audit action plan in accordance with applicabledirectives of the Department of Commerce.

We also noted other matters involving the internal control structure and its operation that wehave reported to PTO’s Associate Commissioner and Chief Financial Officer in a separateletter dated February 10, 1995.

This report is intended for the information of management of the PTO, the Department ofCommerce management, and the Office of Management and Budget. This restriction is notintended to limit the distribution of this report, which is a matter of public record.


February 10, 1995

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INSPECTOR GENERAL’S REPORT ON COMPLIANCE WITH LAWS ANDREGULATIONS

Mr. Bruce A. LehmanAssistant Secretary of Commerce andCommissioner of Patents and TrademarksPatent and Trademark OfficeWashington, D.C.

We have audited the Statements of Financial Position of the Patent and Trademark Office(PTO) as of September 30, 1994 and 1993, and the Statements of Operations and Changes inNet Position, Cash Flows, and Budgetary Resources and Actual Expenses for the year endedSeptember 30, 1994, and have issued our report thereon dated February 10, 1995.

We conducted our audits in accordance with generally accepted auditing standards;Government Auditing Standards, issued by the Comptroller General of the United States; andOffice of Management and Budget Bulletin No. 93-06, Audits of Federal FinancialStatements. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements.

Compliance with laws and regulations applicable to the PTO is the responsibility of thePTO’s management. As part of obtaining reasonable assurance about whether the financialstatements are free of material misstatements, we tested compliance with those laws andregulations directly affecting the financial statements and certain other laws and regulationsdesignated by the Office of Management and Budget and the PTO. As part of our audit, wealso obtained an understanding of management’s process for evaluating and reporting oninternal control and accounting systems as required by the Federal Managers’ FinancialIntegrity Act (FMFIA) and compared the material weaknesses reported in the Department ofCommerce’s FMFIA report that relate to the financial statements under audit to theconditions found during the evaluation we conducted of PTO’s internal control system.However, our objective was not to provide an opinion on overall compliance with suchprovisions.

The results of our tests indicate that with respect to the items tested, the PTO complied in allmaterial respects with the provisions referred to in the preceding paragraph. With respect to

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items not tested, nothing came to our attention that caused us to believe the PTO had notcomplied, in all material respects, with those provisions identified above.

This report is intended for the information of the management of the PTO, Department ofCommerce management, and the Office of Management and Budget. This restriction is notintended to limit the distribution of this report, which is a matter of public record.


February 10, 1995

ADDITIONALINFORMATION



DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICE1994 FEE COLLECTIONS BY CATEGORY

Patent Fee Collections

Trademark Fee Collections

Other Fee Collections


DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICE1994 STATEMENT OF OPERATIONS BY PROGRAM - UnauditedFor the year ended September 30, 1994

PATENTS TRADEMARKS OTHER TOTAL

REVENUES AND FINANCING SOURCESRevenues from Sales of Goods and Services

To the Public $472,275,784 $45,684,955 $23,633,140 $541,593,879Intragovernmental 11,338 11,338

Appropriated Capital Used 2,116,362 2,116,362

Total Revenues and Financing Sources 474,403,484 45,684,955 23,633,140 543,721,579

EXPENSESProgram or Operating Expenses 347,001,961 36,977,050 85,168,913 469,147,924Depreciation and Amortization 13,779,441 607,710 2,502,181 16,889,332Changes in Actuarial Liability (417,369) (42,342) (145,171) (604,882)

Total Expenses 360,364,033 37,542,418 87,525,923 485,432,374

Excess (Shortage) of Revenues and FinancingSources Over Total Expenses $114,039,451 $ 8,142,537 ($63,892,783) $ 58,289,205

“Other” represents revenue and expenses not directly associated with a patent filing or a trademark registra-tion, but rather those revenues such as service fees or administrative fees and non-direct patent and trademarkexpenses.


DEPARTMENT OF COMMERCEPATENT AND TRADEMARK OFFICE1994 PROGRAM/OPERATING EXPENSES BY PROGRAM - UnauditedFor the year ended September 30, 1994

PATENTS TRADEMARKS OTHER TOTAL

OPERATING EXPENSES BY OBJECT CLASSIFICATIONPersonal Services and Benefits $225,427,558 $25,978,907 $39,980,421 $291,386,886Travel and Transportation 199,865 42,409 588,321 830,595Rental, Communications and Utilities30,262,986 4,417,985 11,389,923 46,070,894Printing and Reproduction 28,267,147 1,288,343 771,140 30,326,630Contractual Services 48,108,171 2,494,353 20,780,096 71,382,620Supplies and Materials 4,216,555 481,585 2,766,462 7,464,602Equipment not Capitalized 3,677,374 644,387 1,609,997 5,931,758Insurance Claims and Indemnities 0 0 13,785 13,785Other:

(a) Other Services 2,534,697 930,220 2,891,214 6,356,131(b) Training 2,124,753 291,331 1,395,447 3,811,531(c) Maintenance and Repair 2,182,855 407,530 2,982,107 5,572,492

Total Expenses by Object Class $347,001,961 $36,977,050 $85,168,913 $469,147,924


Table 1SUMMARY OF PATENT EXAMINING ACTIVITIES(As of September 30 of each Fiscal Year)

Patent Examining Activity 1990 1991 1992 1993 1994

PATENT APPLICATIONS FILEDUtility1 162,708 166,765 171,623 173,619 185,087Reissue 468 536 581 572 430Plant 395 414 335 362 606Design 11,140 10,368 12,907 13,546 15,431

Total Patent Applications Filed 174,711 178,083 185,446 188,099 201,554

FIRST ACTIONSDesign 13,693 15,503 16,076 16,074 16,832Utility, Plant, and Reissue 149,425 158,319 165,294 171,799 168,722PCT/Chapter I 4,644 5,680 7,247 7,459 8,363

PATENT APPLICATIONS ALLOWED1

Design 9,679 10,394 11,013 11,800 12,388Utility, Plant, and Reissue 96,672 102,014 103,093 104,351 107,221

Total Patent Applications Allowed 106,351 112,408 114,106 116,151 119,609

PATENT APPLICATIONS ABANDONEDDesign 3,991 4,427 4,843 4,681 4,977Utility, Plant, and Reissue 45,750 53,703 59,199 60,763 64,932

Total Patent Applications Abandoned 49,741 58,130 64,042 65,444 69,909

OTHER PATENT APPLICATIONS DISPOSEDStatutory Invention Registrations 177 142 278 146 128

TOTAL PATENT APPLICATION DISPOSALS 156,269 170,680 178,426 181,741 189,646

PCT/CHAPTER II EXAMINATIONS COMPLETED2,168 4,014 5,010 5,851 6,918

PATENTS ISSUED3

Utility 88,974 91,822 99,405 96,676101,270

Reissue 282 334 375 302 347Plant 295 318 336 408 513Design 7,176 9,386 9,612 9,946 11,138

Total Patents Issued 96,727 101,860 109,728 107,332 113,268

ALLOWED APPLICATIONS, ISSUE FEE NOT PAID4 3,476 4,854 4,781 5,778

5,883PENDENCY TIME OF AVERAGE PATENT

APPLICATION5 18.3 18.2 19.1 19.5 19.0REEXAMINATIONS REQUESTED6 297 307 392 359 379REEXAMINATION CERTIFICATES ISSUED6 224 200 243 293 309PCT SEARCH REPORTS PREPARED7 4,218 6,000 6,586 8,714 10,813PCT INTERNATIONAL APPLICATIONS RECEIVED

BY USPTO AS RECEIVING OFFICE7 7,216 9,158 10,929 12,389 14,265NATIONAL REQUIREMENTS RECEIVED

BY USPTO AS RECEIVING OFFICE7 5,143 6,247 6,835 7,441 8,778INTERNATIONAL PRELIMINARY EXAMINATION

REPORTS 2,298 3,774 4,678 5,955 8,005PATENTS RENEWED UNDER P.L. 102-2048 49,539 73,954 107,713 114,367 121,104PATENTS EXPIRED UNDER P.L. 102-2048 12,060 19,134 28,603 38,475 38,859

1Chemical, electrical and mechanical applications.2“Allowed Patent Applications” are applications awaiting issuance (i.e., publication) as patents.3Excludes withdrawn numbers.435 U.S.C. § 151.(includes design applications).5Average time (months) between filing and issunace/abandonment of utility, plant, and reissue applications (excluding designs).6Reexamination was instituted on July 1, 1981, in accordance with provisions of P.L. 96-517.7PCT entered into force on January 24, 1978, and applications were accepted for filing beginning June 1, 1978.8Renewal of patents under P.L. 96-517 and P.L. 97-247 now superseded by P.L. 102-204.


Table 3SUMMARY OF PENDING PATENT APPLICATIONS(as of September 30, 1994)

Utility, Plant and Design Total PatentStage of Processing Reissue Applications Applications Applications

IN PREEXAMINATION PROCESSING 28,129 648 28,777

UNDER EXAMINATIONAwaiting First Action by Examiner 73,043 11,331 84,374Rejected, Awaiting Response by Applicant 107,155 4,738 111,893Amended, Awaiting Action by Examiner 22,660 790 23,450In Interference 1,548 17 1,565On Appeal and Other1 10,937 253 11,190 Total Under Examination 215,343 17,129 232,472

IN POSTEXAMINATION PROCESSINGAwaiting Issue Fee 27,895 3,193 31,088Awaiting Printing2 24,303 2,753 27,056D-10s (secret cases in condition for allowance) 3,624 0 3,624 Total in Postexamination Processing 55,822 5,946 61,768

TOTAL PENDING IN PATENT AND TRADEMARK OFFICE299,294 23,723 323,017

1 includes cases on appeal and undergoing petitions2 includes withdrawn cases

Table 2PATENT APPLICATIONS FILED(FY 1974 - FY 1994)

Year Utility1 Design Plant Reissue Total

1974 103,479 4,948 109 391 108,9271975 101,283 5,751 163 465 107,66219762 101,807 6,838 144 438 109,22719772 101,821 7,186 202 564 109,7731978 100,473 7,440 171 660 108,7441979 99,516 7,070 166 657 107,4091980 104,219 7,269 186 641 112,3151981 106,828 7,197 147 538 114,7101982 116,052 8,069 193 486 124,8001983 96,847 8,256 231 370 105,7041984 109,010 8,446 248 281 117,9851985 115,893 9,504 244 290 125,9311986 120,988 9,792 291 332 131,4031987 125,677 10,766 364 366 137,1731988 136,253 11,114 377 439 148,1831989 150,418 11,975 418 495 163,3061990 162,708 11,140 395 468 174,7111991 166,765 10,368 414 536 178,0831992 171,623 12,907 335 581 185,4461993 173,619 13,546 362 572 188,0991994 185,087 15,431 606 430 201,554

1Chemical, electrical, and mechanical applications.2The Transition Quarter, July 1, 1976, to September 30, 1976, hasbeen omitted.

Table 4PATENTS PENDING PRIOR TO ALLOWANCE1

(FY 1974 - FY 1994)

Awaiting Action Total ApplicationsYear by Examiner Pending2

1974 47,411 162,4471975 41,916 146,46419763 43,776 142,37919773 60,706 144,5421978 57,031 144,0561979 50,085 151,7021980 64,289 167,5331981 71,033 181,7271982 87,659 216,5091983 102,532 223,1011984 90,687 219,5671985 90,648 215,5121986 80,547 207,7741987 65,010 209,9111988 75,678 215,2801989 92,377 222,7551990 104,179 244,9641991 104,086 254,5071992 112,201 269,5961993 99,904 244,6461994 107,824 261,249

1Pending at end of period indicated including utility, reissue, plant, and designapplications. Does not include allowed applications.2Applications under examination, including those in preexamination processing.3The Transition Quarter, July 1, 1976, to September 30, 1976, has been omitted.


Table 7REEXAMINATION 1(FY 1990 - FY 1994)

1990 1991 1992 1993 1994REQUESTS FILED

By patent owner 124 141 167 147 150By third party 172 165 168 211 227Commissioner ordered 1 1 57 1 2

Total 297 307 392 359 379

DETERMINATIONS ON REQUESTSRequests granted

By examiner 243 267 316 311 334By petition 4 5 5 10 6

Requests denied 36 23 25 29 30 Total 283 295 346 350 370

REQUESTS KNOWN TO HAVE RELATED LITIGATION 27 47 47 75 77COURT ORDERED REEXAMINATIONS 0 0 0 0 0AVERAGE AGE OF PATENTS (years) 4.60 5.20 5.00 5.00 3

AVERAGE RANGE OF PATENTS (years) 0.0-22.8 0.0-22.8 0.0-18.1 2 3

AVERAGE CLAIMS PER REQUEST 15.30 15.40 15.40 2 3

AVERAGE REFERENCES PER REQUEST 9.50 9.60 9.40 9.50 9.60FILINGS BY DISCIPLINE

Chemical 90 93 101 111 102Electrical 113 115 186 138 146Mechanical 94 99 105 110 131

Total 297 307 392 359 379

1Reexamination was instituted on July 1, 1981, in accordance with provisions of P.L. 96-517.2Data for FY 1993 was not available.3Data for FY 1994 was not available.

Table 5PATENTS ISSUED1

(FY 1974 - FY 1994)

Year Utility2 Design Plant Reissue Total

1974 79,300 4,439 211 367 84,3171975 70,179 3,632 155 398 74,3643

19764 75,325 4,781 195 434 80,7353

19774 67,972 4,261 164 435 72,8321978 65,963 3,797 194 366 70,3201979 51,686 3,269 151 312 55,4181980 56,618 4,167 137 305 61,2271981 66,617 3,882 168 343 71,0101982 59,449 5,299 120 284 65,1521983 54,744 4,401 219 351 59,7151984 66,753 4,935 174 287 72,1491985 69,667 5,058 277 300 75,3021986 71,301 5,202 227 263 76,9931987 82,141 6,158 240 254 88,7931988 77,317 5,740 283 244 83,5841989 95,831 5,844 728 309 102,7121990 88,974 7,176 295 282 96,7271991 91,822 9,386 318 334 101,8601992 99,405 9,612 336 375 109,7281993 96,676 9,946 408 302 107,3321994 101,270 11,138 513 347 113,268

1Excludes withdrawn numbers beginning with FY 1978.2Chemical, electrical, and mechanical applications.3In 1975, under the trial voluntary protest program (now abolished), anadditional 667 applications were published but not issued. In 1976, there were1,303 published but not issued.4The Transition Quarter, July 1, 1976, to September 30, 1976, has been omitted.

Table 6STATUTORY INVENTION REGISTRATIONS(SIRs) PUBLISHED(FY 1990 - FY 1994)

Assignee 1990 1991 1992 1993 1994

Agriculture 0 0 1 0 0Air Force 11 14 9 7 6Army 38 35 25 26 21Energy 14 17 11 9 6HHS 0 1 0 00 Navy 14 11 20 1314 TVA 0 0 2 00 USA1 1 4 6 23 Other Than U.S.

Government 62 63 66 67 74Total 141 145 140 124 124

1United States of America-no agency indicated in data base.


Table 8SUMMARY OF CONTESTED PATENT CASES(Within the Patent and Trademark Office)

Patent and Trademark Office TribunalBoard for Patent Appeals and Interferences Totals

EX PARTE CASESAppeals1

Cases Pending as of 9/30/93 2,273Cases Filed During FY 94 4,481

Total 6,754Disposals During FY 94:

DecidedAffirmed 1,446Affirmed-in-Part 362Reversed 1,036

Total Decided 2,844Other Disposals

Dismissed 35Withdrawn 121Suspended 0

Total Other Disposals 156 Total Disposals 3,000

Cases Pending as of 9/30/94 3,754Reconsiderations

Cases Pending as of 9/30/93 62Cases Filed During FY 94 212

Total 274

Table 9U.S. GOVERNMENT AGENCY PATENTS1

(FY 1985 - FY 1994)

Agency 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Total

Agriculture 43 27 36 37 36 41 50 48 57 38 413Air Force 144 178 192 134 131 101 115 138 126 129 1,388Army 206 202 176 116 146 129 113 171 147 193 1,599Commerce 5 7 11 13 6 6 15 18 21 28 130Energy 301 260 239 230 216 190 197 217 193 201 2,244Transportation 4 3 1 0 0 0 2 0 2 1 13NSA 1 2 1 4 5 2 3 3 5 6 32EPA 5 2 1 1 3 4 5 4 7 5 37HHS 30 30 32 32 31 34 41 67 88 97 482Interior 11 16 10 11 9 7 13 23 9 10 119NASA 137 109 117 100 125 116 109 166 155 147 1,281Navy 271 207 206 104 117 170 346 314 333 360 2,428Postal Service 1 0 1 0 0 0 1 0 0 0 3TVA 6 9 8 7 4 5 5 2 1 0 47Treasury 0 0 0 0 0 0 0 0 0 0 0VA 0 1 1 0 0 0 0 0 0 2 4USA2 1 0 1 1 8 5 10 10 9 3 48FCC 0 0 0 0 0 0 0 0 0 0 0Total 1,166 1,053 1,033 790 837 810 1,025 1,181 1,153 1,220 10,268

1Data in this table represent utility patents assigned to agencies at the time of patent issue.2United States of America—no agency indicated in data base.

Disposals During FY 94 249Cases Pending as of 9/30/94 25

INTER PARTES CASESCases Pending as of 9/30/93 395Cases Declared or Reinstituted During

FY 94 (under New Rules2) 240Cases Declared or Reinstituted During

FY 94 (under Old Rules2) 0Total Cases Declared or Reinstituted 240Total 635

Disposals During FY 94:Cases Terminated (under New Rules2) 250Cases Terminated (under Old Rules2) 0

Total Terminated 250

Cases Awaiting Final Board Disposition as of 9/30/94:Awaiting the Setting of a Final Hearing 21Set for Final Hearing 21Awaiting a Final Decision 47

Total Cases Awaiting Final BoardDisposition 89

Cases Pending as of 9/30/94:Under New Rules2 385Under Old Rules2 0

Total Cases Pending as of 9/30/94 385

1Jurisdiction of an appeal passes to the Board of Patent Appeals and Interferences after the examiner has written his answer and after the time for filing areply brief to the answer has passed.2New Rules effective 2/8/85: 37 CFR 1.601 to 1.688 Old Rules: 37 CFR 1.201 to 1.288


Table 10PATENTS ISSUED TO RESIDENTS OF THE UNITED STATES(FY 1991- FY 1994)1

State/Territory 1991 1992 1993 1994

Alabama 357 324 311 339Alaska 43 54 52 61Arizona 855 921 903 1,027Arkansas 152 170 162 155California 8,423 9,284 9,216 10,472Colorado 851 954 995 1,140Connecticut 1,503 1,642 1,701 1,842Delaware 491 553 491 513District of Columbia 67 67 62 44Florida 1,888 2,114 2,086 2,241Georgia 720 793 879 925Hawaii 78 85 88 116Idaho 221 261 320 350Illinois 3,040 3,355 3,275 3,266Indiana 1,108 1,123 1,070 1,137Iowa 390 417 442 463Kansas 321 329 319 319Kentucky 333 329 310 343Louisiana 491 537 484 475Maine 104 130 120 149Maryland 937 1,070 1,058 1,137Massachusetts 2,105 2,445 2,428 2,669Michigan 2,830 3,153 2,981 3,295Minnesota 1,447 1,631 1,702 1,914Mississippi 111 144 136 166Missouri 770 832 759 730Montana 86 109 114 94Nebraska 149 162 191 173Nevada 185 172 152 221New Hampshire 333 361 403 452New Jersey 3,218 3,189 3,145 3,328New Mexico 232 261 237 270New York 4,815 5,047 5,083 5,522North Carolina 942 933 1,049 1,181North Dakota 63 63 65 69Ohio 2,714 3,073 2,929 3,078Oklahoma 612 672 653 624Oregon 670 686 819 772Pennsylvania 2,799 3,027 2,893 3,085Puerto Rico 13 28 17 33Rhode Island 222 237 270 275South Carolina 428 476 517 529South Dakota 39 35 47 47Tennessee 568 594 601 684Texas 3,302 3,704 3,695 4,089Utah 402 448 448 473Vermont 132 122 149 173Virgin Islands 2 2 3 2Virginia 870 1,013 983 959Washington 1,016 1,077 1,036 1,117West Virginia 179 174 202 147Wisconsin 1,207 1,342 1,314 1,381Wyoming 47 36 39 51U.S. Pacific Islands2 1 0 1 0United States3 0 0 0 2TOTAL 54,882 59,760 59,405 64,119

1Data includes utility, design, plant, and reissue patents.2Represents residents of American Samoa, Guam, and miscelleneous U.S. Pacific Islands.3No state indicated in data base.


Table 11UNITED STATES PATENT APPLICATIONS FILED BY RESIDENTS OF FOREIGN COUNTRIES1

(FY 1990 - FY 1994)

Residence 1990 1991 1992 1993 1994

Albania 1 1 1 0 0Algeria2 0 1 0 0 0Andorra 0 0 0 0 1Antigua & Barbuda 0 0 4 1 2Argentina 57 51 59 65 77Armenia 0 0 1 0 0Australia 990 844 905 853 1,078Austria 575 528 563 507 637Azerbaijan3 0 0 0 1 2Bahamas 7 1 5 8 8Barbados 1 0 0 0 1Belarus 0 0 2 6 5Belgium 630 619 676 666 841Belize 0 0 0 0 0Bermuda 3 4 2 1 3Bolivia 0 0 0 0 1Brazil 113 103 115 106 161British Virgin Islands 0 0 2 1 1Brunei 0 0 0 0 0Bulgaria4 36 7 9 5 3Burma 1 0 0 0 0Canada 3,965 3,905 3,975 4,196 4,638Cayman Islands 3 2 2 1 1Chile 10 13 9 13 8China (mainland) 122 109 133 124 114Cocos (Keeling) Islands 0 0 0 0 0Colombia 10 9 13 4 16Comoros 0 1 0 0 0Cook Islands 0 0 0 0 1Costa Rica 8 3 6 5 24Croatia 0 0 0 3 11Cuba 0 4 6 0 3Cyprus 1 1 2 2 2Czechoslovakia 49 30 34 28 30Denmark 408 455 397 496 537Dominican Republic 1 1 1 1 2Ecuador 4 1 1 5 1Egypt 5 4 9 6 3Estonia 0 0 0 0 2Finland 582 616 531 576 705France 4,838 4,948 4,757 4,554 4,790Georgia 0 0 0 0 2Germany, Fed.

Republic of5 11,736 10,952 10,851 10,550 11,539Ghana 0 0 0 1 0Greece 30 21 26 23 25Guatemala 2 1 3 1 2Guinea 0 0 1 0 0Guyana 1 1 0 0 0Haiti 0 2 0 1 1Honduras 0 1 0 0 2Hong Kong 265 253 315 303 385Hungary 131 107 86 61 73Iceland 4 5 16 4 6India 64 52 56 54 64Indonesia 3 9 15 11 5Iran 5 7 1 9 4Iraq 3 0 0 0 0Ireland 122 128 118 102 152Israel 632 663 747 833 998Italy 2,265 2,209 2,345 2,159 2,160Jamaica 1 4 1 1 3Japan 34,309 36,489 38,135 36,148 36,912Jordan 2 5 0 0 1Kazakhstan6 0 0 0 1 1Kenya 3 1 3 2 2Korea, Dem.

Republic of 22 11 6 0 2Korea, Republic of 768 1,132 1,444 1,512 2,177Kuwait 4 1 2 1 1Lebanon 0 2 0 2 1Liechtenstein 9 18 14 14 19Lithuania 0 0 0 1 0Luxembourg 41 48 58 49 41Macau 0 0 0 1 1Malaysia 14 25 24 18 44Mali 1 0 0 0 0Malta 1 0 3 3 1Marshall Islands 0 0 0 1 0

Residence 1990 1991 1992 1993 1994

Mauritius 0 1 0 1 1Mexico 71 114 104 92 117Moldova Republic 0 0 0 0 1Monaco 5 5 5 6 3Mongolia 0 0 0 0 1Montserrat 0 0 0 0 1Morocco 0 0 4 2 3Namibia 0 0 0 0 1Nauru 0 1 0 0 0Netherlands 1,740 1,580 1,579 1,548 1,549Netherlands Antilles 0 0 0 2 2Neutral Zone 0 1 0 0 0New Caledonia 0 0 0 1 0New Zealand 142 105 116 103 148Nicaragua 0 1 0 1 0Nigeria 3 2 1 6 2Norway 170 169 198 198 196Oman 0 1 1 0 0Pakistan 1 0 5 0 1Panama 3 3 1 0 6Peru 2 5 3 5 8Philippines 8 12 10 6 6Poland 17 14 17 24 26Portugal 13 3 9 12 8Romania7 1 1 2 4 5Russian Federation 0 0 12 115 200Saudi Arabia 5 11 14 17 21Senegal 0 1 0 0 0Singapore 45 68 76 100 134Slovakia8 0 0 0 1 5Slovenia 0 0 5 24 15Solomon Islands 0 0 0 0 0South Africa 208 185 203 228 238Soviet Union 375 186 165 70 22Spain 321 314 316 285 367Sri Lanka 3 2 0 1 1St. Christ-Nevis 0 0 0 0 1St. Vincent/Grenadines 0 0 0 1 0Swaziland 1 0 1 0 0Sweden 1,192 1,200 1,066 1,162 1,492Switzerland 2,055 1,953 1,839 1,937 1,922Syria 1 0 0 1 0Taiwan 2,221 2,541 2,957 3,370 3,847Tanzania 0 1 0 0 0Thailand 13 9 24 13 24Trinidad & Tobago 0 2 2 3 3Tunisia 1 0 3 0 1Turkey 6 3 1 4 4Uganda9 0 0 1 4 0Ukraine 0 0 0 18 17United Arab Emirates 4 1 2 0 4United Kingdom 5,326 4,739 4,537 4,503 5,104Uruguay 3 2 3 9 3Uzbekistan 0 0 1 1 1Vatican City 0 0 0 0 1Venezuela 44 46 58 30 51Vietnam 0 0 0 0 1Yemen10 0 0 0 1 0Yugoslavia 41 35 38 11 10Zaire 1 0 0 0 0Zimbabwe 2 2 3 1 1Other11 0 2 3 8 12Total 76,902 77,729 79,875 78,029 83,920

1Data include utility, design, plant, and reissue applications. Country listingsinclude possessions and territories of that country unless separately listed in thetable.2FY 1993 data for Algeria corrected to indicate no applications filed.3FY 1993 data for Azerbaijan corrected to indicate one application filed.4FY 1993 data for Bulgaria corrected to indicate five applications filed.5Germany now includes applications filed by residents of the territory whichprior to October 3, 1990 was the Democratic Republic of Germany.6FY 1993 data for Kazakhstan corrected to indicate one application filed.7FY 1993 data for Romania corrected to indicate four applications filed8FY 1993 data for Slovakia corrected to indicate one application filed.9FY 1993 data for Uganda corrected to indicate four applications filed.10FY 1993 data for Yemen corrected to indicate one application filed.11Country of origin information not available.


Residence 1991 1992 1993 1994

Andorra 0 0 1 0Antigua 1 0 0 1Argentina 17 21 30 27Australia 550 550 433 533Austria 367 424 320 337Bahamas 7 2 4 0Barbados 0 1 0 0Belgium 356 382 351 410Belize 1 0 0 0Bermuda 0 0 0 2Brazil 61 55 58 57British Virgin Islands 1 1 1 2Bulgaria 17 4 5 2Canada 2,184 2,311 2,198 2,275Cayman Islands 1 4 0 2Chile 5 6 11 6China (Mainland) 48 50 58 41Colombia 2 5 8 7Costa Rica 1 5 3 7Croatia 0 0 0 3Cuba 0 0 1 5Cyprus 1 0 1 2Czechoslovakia 33 18 17 20Denmark 280 263 288 260Dominican Republic 2 1 0 1Ecuador 3 0 1 3Egypt 1 3 1 4Faroe Islands0 0 0 1Finland 332 368 328 337France 3,094 3,332 3,165 3,051French Polynesia 1 0 0 0Germany2 7,548 7,960 7,172 7,024Greece 11 10 7 16Guadeloupe 0 0 0 1Guatemala 2 3 1 2Guyana 1 1 0 0Haiti 0 0 0 0Honduras 0 0 1 0Hong Kong 209 169 174 200Hungary 87 84 78 50Iceland 0 5 4 6India 28 23 21 33Indonesia 1 6 7 9Iran 2 1 1 1Ireland 49 61 63 53Israel 304 377 358 354Italy 1,379 1,455 1,452 1,376Jamaica 2 1 0 0Japan 21,464 23,481 22,942 23,764Jordan 0 1 0 0Kenya 1 1 3 0Korea, Dem. Republic of 2 0 1 1Korea, Republic of 413 543 789 941Kuwait 0 2 2 1Lebanon 1 1 1 1Liechtenstein 13 11 14 11Luxembourg 42 36 37

48 Residence 1991 1992 19931994Malaysia 10 8 22 16Malta 0 0 2 1Mauritius 0 1 1 1Mexico 44 44 44 56Monaco 6 6 6 6Morocco 0 1 1 0Netherlands 1,043 1,019 961 944Netherlands Antilles 1 1 0 0New Zealand 49 58 50 54Nicaragua 0 0 1 0Nigeria 1 2 0 0Norfolk Island 0 0 0 0Norway 111 120 120 128Oman 0 0 1 0Pakistan 0 1 0 1Panama 1 1 1 0Paraguay 1 0 0 0Peru 2 4 2 2Philippines 9 10 6 1Poland 10 8 7 6Portugal 9 9 2 6Romania 1 0 2 1Russian Federation 0 0 2 22San Marino 0 0 0 1Saudi Arabia 7 7 4 9Senegal 0 1 0 0Singapore 24 23 46 58Slovenia 0 0 1 10South Africa 114 113 89 99Soviet Union 194 89 6863 Spain 159 177 160181Sri Lanka 0 2 30St.Vincent/The Grenadines 0 0 0 1Sweden 843 747 743 754Switzerland 1,384 1,369 1,193 1,225Syria3 0 2 0 0Taiwan 1,000 1,195 1,453 1,709Tanzania 0 0 1 0Thailand 3 1 12 13Trinidad & Tobago 1 3 0 2Tunisia 0 1 0 1Turkey 2 4 0 1Uganda 0 0 0 3Ukraine 0 0 0 5United Arab Emirates 2 1 1 1United Kingdom 2,974 2,851 2,462 2,424Uruguay 0 2 0 0Uzbekistan 0 0 0 1Venezuela 21 28 28 31Yemen 0 0 0 1Yugoslavia 27 20 20 19Zimbabwe 0 1 1 4 TOTALS 46,978 49,968 47,927 49,149

1Data include utility, design, plant, and reissue patents. Country listings includepossessions and territories of that country unless separately listed in the table.2Germany now includes patents granted to residents of the territoy which priorto October 3, 1990 was the Democratic Republic of Germany.3FY 1992 was corrected to indicate the issuance of two patents to Syria.

Table 12PATENTS ISSUED BY THE UNITED STATES TO RESIDENTS OF FOREIGN COUNTRIES(FY 1991 - FY 1994)1


Table 13PATENT CLASSIFICATION ACTIVITY(1991-1994)

Classification Activity 1991 1992 1993 1994

Original Patents ProfessionallyReclassified - Completed Projects 103,722 118,339 127,702 138,467

Subclasses Established 2,426 4,001 6,358 5,056Reclassified Patents Clerically Processed:

Original U.S. Patents 58,151 121,184 124,758 131,062Cross-Reference U.S. Patents 86,762 193,820 262,400 232,143Foreign Patents1 139,000 194,000 283,230 139,042

Total Patents Reclassified2 283,913 509,004 670,388 502,247

1FY 93 actual count based on new automated system introduced in FY93.2FY 91 total corrected from prior number of 283,943.

Table 14SCIENTIFIC AND TECHNICAL INFORMATION CENTER ACTIVITY

Scientific and Technical Information Center Activity FY 1994

Literature Collections and ServicesAdditions to the Literature Collections: Books Purchased 2,654 Journal Subscriptions Purchased 1,751 Journal Issues Received 25,057Literature Services Provided: Documents Circulated 3,467 Interlibrary Loans Processed 29,629 On-Line Commercial Data Base Searches 10,792 Sequence Searches Completed 2,501 Number of Sequences Searched 20,524 Reference Questions Completed 11,088Foreign Document Collections and ServicesAdditions to the Foreign Patent Document Collections: Microfilm Reels 4,351 Microfiche 86,602 CD-ROM 1,373 Documents in Paper Form (Unique) 974,496 Journals 3,979Foreign Document Services Provided: Words of Foreign Material Translated (written) 14,421,089 Documents Orally Translated 3,366 Copies of Foreign Patents Provided 10,580 Microfilm Reels Furnished for Copying 103,546 On-line and Manual Searches Completed 9,643 Reference Questions Completed 11,974


Table 15SUMMARY OF TRADEMARK EXAMINING ACTIVITIES

(FY 1988 - FY 1994)

Item 1988 1989 1990 1991 1992 1993 1994

Applications for Registration Filed 76,813 83,169 127,294 120,365 125,237 139,735 155,376Disposal of Trademark Applications: Applications Maturing to Registration 52,461 58,599 63,924 49,8101 69,691 86,122 68,853 Applications Abandoned 13,647 15,097 17,210 20,721 26,435 40,752 42,467Trademark First Actions 79,425 79,382 92,612 134,988 136,047 131,191 147,343Applications Approved for Publication 61,656 65,178 76,355 95,757 110,940 94,161 97,347Certificates of Registration Issued:2 1946 Act Principal Register 45,090 49,744 54,178 39,398 49,404 54,937 38,238 Principal Register ITU-Statements of Use Registered n/a n/a 0 2,397 10,345 17,174 19,563 1946 Act Supplemental Register 1,614 2,058 2,337 1,357 2,318 2,238 1,996 Total 46,704 51,802 56,515 43,152 62,067 74,349 59,797Renewal of Registration: Applications Filed 6,763 6,127 6,602 5,634 6,355 7,173 7,004 Applications Abandoned 23 86 68 86 90 122 86 Registrations Renewed 5,884 9,209 7,122 6,416 5,733 6,182 6,136Affidavits, Sec. 8/15: Affidavits Filed 18,316 17,986 20,636 25,763 20,982 21,999 20,850 Affidavits Disposed 18,699 17,290 19,630 20,869 23,186 19,279 17,846Affidavits for Benefits Under Sec. 12(c) Affidavits Filed 23 104 5 1 25 5 4 Affidavits Abandoned 0 0 0 0 0 0 0 Published Under Sec. 12(c) 29 84 19 19 13 21 11Amendments to Allege Use Filed n/a n/a 747 3,259 3,255 3,138 4,033 Statements of Use Filed n/a n/a 113 6,773 14,275 25,837 22,057 Notice of Allowance Issued n/a n/a 2,380 23,602 42,432 53,053 40,741Pendency Time of Average Trademark Application:3 Between Filing and Examiner’s First Action — All Applications 2.5 2.8 4.8 4.3 3.1 4.0 5.2 Between Filing, Registration (Use Applications Only) and Abandonments 13.3 13.8 15.3 16.7 15.1 14.4 16.3 Between Filing and Issuing a Notice of Allowance (intent to use applications only) n/a n/a n/a 13.3 13.8 13.0 15.9Total Active Certificates of Registration n/a n/a 675,913 690,745 834,858 712,000 727,983

1Adjusted to include Intent To Use registrations.2With the exception of Certificates of Registration, Renewal of Registration, Affidavits filed under Section 8/15 and 12(c), the workload countincludes extra classes.3Average pendency time in months.


Table 17SUMMARY OF PENDING TRADEMARK APPLICATIONS(As of September 30, 1994)

ApplicationsStage of Processing For

Regis.

IN PREEXAMINATION PROCESSING 34,663UNDER EXAMINATION: Amended, awaiting action by Examiner 10,563 Awaiting first action by Examiner 6,706 Awaiting subsequent action (by applicant, on appeal, in adversary proceeding, in clerical processing)1 67,205 Total Under Examination 84,474

Total 119,137IN POSTEXAMINATION PROCESSING: (Includes all application in all phases of publication and issue) 63,012

TOTAL IN PATENT AND TRADEMARK OFFICE 182,149

1Excludes ITU applications that have received a Notice of Allowance and are awaiting a Statement of Use

Table 16TRADEMARK APPLICATIONS FILED FOR REGISTRATIONAND RENEWAL AND TRADEMARK AFFIDAVITS FILED(FY 1975 - FY 1994)

Year For For Section 8 Sec. 12(c)Registration Renewal Affidavit Affidavit

1975 33,898 5,687 14,644 2919761 37,074 6,833 15,665 2419771 44,539 5,854 13,463 301978 50,106 5,567 13,351 771979 50,672 5,623 13,864 101980 52,149 5,892 13,633 851981 55,152 5,693 17,071 401982 73,621 5,760 15,068 551983 51,014 5,438 12,544 461984 61,480 5,926 13,519 51985 64,677 5,275 8,823 291986 69,253 5,660 8,519 191987 70,002 5,871 16,644 341988 76,813 6,763 18,316 231989 83,169 6,127 17,986 1041990 127,294 6,602 20,636 51991 120,365 5,634 25,763 11992 125,237 6,355 20,982 251993 139,735 7,173 21,999 51994 155,376 7,004 20,850 4

1The transition Quarter, July 1, 1976, to September 30, 1976, has been omitted.


Table 19TRADEMARKS REGISTERED, RENEWED, AND PUBLISHED UNDER SECTION 12(c)1(FY 1974 - FY 1994)

Year Certificates of Renewed PublishedRegis. Issued Under 12(c)

1974 24,838 5,984 541975 27,324 5,474 2519762 28,102 6,914 5619772 25,026 6,251 211978 28,921 5,254 841979 22,210 5,404 341980 14,614 5,862 541981 31,306 5,884 771982 39,025 6,070 711983 41,179 5,695 741984 45,475 5,678 221985 63,122 5,177 271986 48,971 5,550 291987 47,522 4,415 241988 46,704 5,884 291989 51,802 9,209 841990 56,515 7,122 191991 43,152 6,416 191992 62,067 5,733 131993 74,349 6,182 211994 59,797 6,136 11

1Includes withdrawn numbers.2The Transition Quarter, July 1, 1976, to September 30, 1976, has been omitted.

Table 18SUMMARY OF CONTESTED TRADEMARK CASES(Within the Patent and Trademark Office)

Trademark Trial Ex Cancel Conc. Inter- Oppos. Totaland Appeal Board Parte Use ference

Cases Pending as of 9/30/93 1,701 2,124 201 0 6,811 10,837Cases Filed During FY 1994 1,004 1,055 32 0 3,048 5,139Disposals During FY 1994:

Before Hearing 461 583 11 0 2,010 3,065After Hearing 282 13 0 0 48 343

Total 743 596 11 0 2,058 3,408Cases Pending as of 9/30/94:

Awaiting Decision 93 11 1 0 35 140In Process Before Hearing 1 1869 2,572 221 0 7,766 12,428

Total 1,962 2,583 222 0 7,801 12,568

Requests for Extension of Time to Oppose 19,231

1Includes suspended cases


Table 20UNITED STATES TRADEMARK APPLICATIONS FILED BY RESIDENTS OF FOREIGN COUNTRIES(FY 1991- FY 1994)

Residence 1991 1992 1993 1994

Afghanistan 0 0 0 0Albania 0 1 0 0Antigua & Barbuda 0 3 1 3Algeria 0 0 1 0Anguilla1 0 0 1 2Argentina 41 69 43 57Aruba 0 0 1 1Australia 419 457 424 470Austria 148 202 131 178Bahamas 19 20 19 41Bahrain 1 0 0 0Barbados 38 19 11 64Belgium 180 143 121 177Belize 0 0 4 3Benelux Convention 2 0 4 2Bermuda 32 31 51 21Bolivia 1 0 0 1Botswana 0 0 0 1Brazil 147 117 137 108British Virgin Islands 25 83 77 93Bulgaria 1 1 3 2Cambodia 3 0 0 0Canada 3,491 3,294 3,595 4,330Cayman Islands 13 26 16 24Channel Islands 25 36 33 31Chile 26 27 46 29China (mainland) 101 49 67 97Colombia 49 25 43 52Cook Island 0 0 15 0Costa Rica 17 10 15 19Croatia 0 0 0 4Cuba 0 0 0 11Cyprus 3 2 4 3Czechoslovakia 21 15 51 34Denmark 132 121 142 142Dominica 1 0 0 1Dominican Republic 4 7 8 5Ecuador 11 5 10 15Egypt 3 5 1 0El Salvador 2 6 7 7Faroe Islands 0 0 0 1Fiji 4 0 0 2Finland 110 112 129 106France 2,013 1,817 1,484 1,712French Guiana 2 0 0 0French Polynesia 1 0 1 4Germany, Fed. Republic

of2 1,566 1,982 1,947 1,912Ghana 0 0 0 0Gibraltar 2 0 5 2Greece 17 14 19 21Grenada 0 0 1 0Guadeloupe 0 0 1 0Guatemala 15 5 2 5Guinea 0 0 0 1Guyana 2 1 1 1Haiti 2 3 1 2Honduras 2 0 17 4Hong Kong 360 484 319 396Hungary 18 21 6 23Iceland 8 9 11 12India 18 18 23 33Indonesia 24 18 23 15Iran 5 1 19 16Ireland 71 57 64 71Isle of Man 0 19 11 9Israel 80 154 173 242Italy 1,351 964 1,027 952Jamaica 7 19 14 15Japan 1,901 1,691 1,780 1,642Jordan 0 0 0 1Kazakhstan 0 0 0 2Kenya 7 0 0 5Korea, Dem. Republic of 1 0 8 5Korea, Republic of 207 200 200 376

Residence 1991 1992 1993 1994

Kuwait 0 0 0 2Lebanon 3 3 0 1Liberia 0 1 0 4Libya 0 2 0 0Liechtenstein 40 36 79 36Luxembourg 36 64 15 60Macau 0 0 1 1Malaysia 28 23 26 36Mali 0 0 0 0Malta 1 0 1 1Martinique 0 0 0 1Mauritius 0 0 0 2Mexico 242 284 351 435Micronesia 0 0 1 0Monaco 17 17 11 13Morocco3 2 0 2 1N. Mariana Island 0 1 2 0Namibia 2 1 0 0Netherlands 623 515 478 632Netherlands Antilles 52 37 35 20New Zealand 83 71 143 96Nicaragua 1 1 0 0Nigeria 0 0 3 1Norfolk Island 0 0 1 0Norway 97 59 112 82Oman 0 0 0 0Pakistan 0 6 11 6Panama 46 35 26 23Papua New Guinea4 0 0 2 0Paraguay5,6 0 1 0 0Peru 15 19 4 8Phillippines 6 12 11 13Poland 6 11 1 10Portugal 10 37 52 23Romania 0 3 0 4Saint Lucia 0 0 0 1Samoa 0 0 1 0San Marino 1 1 0 0Saudi Arabia 5 4 7 6Scotland 0 27 0 33Singapore 58 66 97 172Slovenia 0 0 8 12Somalia 0 0 1 0South Africa 52 97 54 99Soviet Union 43 25 19 40Spain 308 394 343 312Sri Lanka 0 11 4 3Swaziland 0 4 5 1Sweden 333 389 456 398Switzerland 777 547 727 908Syria 0 0 1 0Taiwan 466 470 460 504Thailand 62 34 51 31Trinidad & Tobago 4 7 5 22Turkey 1 7 11 11Turks and Caicos Islands 0 1 0 6Uganda 0 2 1 1Ukraine 0 1 0 6United Arab Emirates 2 3 8 4United Kingdom 1,861 1,705 1,999 2,129Uruguay 3 10 5 8Vanuatu 0 4 4 0Venezuela 171 78 51 25Vietnam 0 0 0 1Wales 0 10 0 0Yugoslavia 20 21 8 1Zimbabwe 2 1 0 7Total 18,229 17,521 18,062 19,868

1Anguilla filings for FY 1993 corrected to reflect 1 application.2Germany now includes applications filed by residents of the territory whichprior to October 3, 1990 was the Democratic Republic of Germany.3Morocco filing for FY 1992 corrected to reflect no applications.4Papua New Guinea filings for FY 1993 corrected to reflect 2 applications.5Paraguay filings for FY 1991 corrected to reflect no applications.6Paraguay filings for FY 1992 corrected to reflect 1 application.


Table 21TRADEMARKS REGISTERED BY THE UNITED STATES TO RESIDENTS OF FOREIGN COUNTRIES(FY 1991 - FY 1994)Residence 1991 1992 1993 1994

Afghanistan 2 0 0 0Antigua & Barbuda 10 3 1 0Argentina 14 24 26 21Australia 225 201 268 196Austria 67 62 116 82Bahamas 9 3 14 10Bahrain 1 1 2 0Bangladesh 0 0 0 1Barbados 1 6 5 4Belgium 106 76 110 64Belize 1 1 0 1Benelux Convention 2 6 0 0Bermuda 2 3 11 16Bolivia 0 0 0 0British Virgin Islands 7 9 32 24Brazil 45 54 67 73Canada 1,062 1,218 1,680 1343Cayman Islands 20 12 10 12Channel Islands1 0 3 0 0Chile 17 14 19 13China (mainland) 42 31 67 38Cook Islands 0 0 1 3Colombia 7 19 33 25Costa Rica 6 4 6 10Cuba 3 1 0 4Cyprus 0 0 2 3Czechoslovakia 7 6 6 13Denmark 113 72 79 70Dominican Republic 3 4 2 3Ecuador 3 1 4 3Egypt 0 0 2 2El Salvador 2 5 4 4Fiji 0 1 1 0Finland 42 37 85 57France 776 828 1,334 797French Polynesia 1 0 2 0Germany, Federal Republic

of2 692 702 1,224 847Ghana 1 2 0 1Greece 4 1 8 12Grenada 1 0 0 0Guadeloupe 0 0 1 0Guatemala 10 8 10 0Guyana 0 0 2 0Haiti 2 5 0 1Honduras 0 0 0 1Hong Kong 83 130 175 160Hungary 8 8 9 10Iceland 5 1 9 2India 4 21 16 26Indonesia 2 5 7 11Iran 3 7 4 4Ireland 28 20 28 35Isle of Man 0 1 1 0Israel 24 41 82 70Italy 595 571 789 469Jamaica 2 6 10 5Japan 644 793 1,108 932Jordan 0 0 0 1Kenya 0 1 0 1Kiribati 0 0 5 1Korea, Republic of 68 83 129 103

Residence 1991 1992 1993 1994

Kuwait 0 0 0 0Lebanon 0 2 7 4Liberia 2 8 5 3Libya 0 1 0 1Liechtenstein 23 15 29 15Luxembourg 17 6 21 18Macau 0 0 2 0Malaysia 2 1 4 9Malta 1 2 2 0Mauritius 2 2 0 0Mexico 68 101 152 137Monaco 6 4 7 5Morocco 5 0 0 0Namibia 0 0 1 0Netherlands 191 213 350 248Netherlands Antilles 9 8 14 7New Zealand 21 31 58 44Nicaragua 0 0 1 0Nigeria 0 0 2 2Norway 30 39 46 41Oman 0 0 0 0Pakistan 0 1 3 2Panama 20 24 31 23Papua New Guinea 0 0 0 0Paraguay 0 0 1 0Peru 3 5 11 8Philippines 4 3 11 2Poland 0 6 7 6Portugal 6 5 25 17Romania 0 0 1 0Saint Lucia 0 0 0 1San Marino 1 0 0 0Saudi Arabia 0 0 1 2Scotland 0 1 0 0Singapore 10 17 28 23South Africa 10 9 34 24Soviet Union 16 10 13 4Spain 135 147 301 197Spratly Islands 0 0 1 2Sri Lanka 0 0 1 2Sweden 98 128 224 192Switzerland 293 304 486 258Syria 0 2 2 3Taiwan 117 223 357 290Thailand 3 16 29 16Trinidad & Tobago 2 2 7 8Turkey 1 6 4 2Turks and Caicos Islands 0 0 0 1United Kingdom 738 799 1,113 826Uruguay 5 1 0 3Venezuela 27 24 46 25Vietnam 1 1 2 3Yugoslavia 6 2 7 6Zimbabwe 2 1 1 0Other3 0 0 0 2Total 6,647 7,281 11,054 8,066

1FY 1993 data for the Channel Islands was corrected to reflect no applicationsfiled.2Germany now includes applications filed by residents of the territory whichprior to October 3, 1990 was the Democratic Republic of Germany.3Country of origin information not available.


Table 23PATENT SERVICES WORKLOAD(FY 1994)

Search Room: New Patents and Cross References Filed 351,201 Reclassified Patents Filed 493,825Assignments:

Abstracts of Title 507Documents Recorded/Processed 185,840

Copies Supplied:Foreign Exchange Programs 1 16,935,557Patent and Trademark Depository Libraries 14,836,758Public, Other Government Agencies and USPTO 955,195Advance Orders 703,549

Certified Documents 108,978Total Files Processed2 572,075

1Includes copies of patents disseminated on paper, microfilm, and CD-ROM.2The number of patent files provided from the PTO File Repository and the Federal Record Center to the publicand the PTO, new issues filed, and new abandonments filed.

Table 22TRADEMARK SERVICES WORKLOAD(FY 1994)

1994

Search Room:Copies of New Registrations Filed in Registered File 173,960Copies of New Drawings Filed in Pending File 341,244

Official Register: Total Updates Stamped on Marks 51,795Assignments:

Abstracts of Title 199Documents Recorded/Processed 81,255

Copies Supplied:Public, Other Government Agencies and USPTO 25,641

Certified Documents1 35,532Status Copies2 218Total Files Processed3 267,371

1Includes documents certified by the Trademark organization through 7/5/94. Due to the PTO reorganization inFY 94, Trademarks no longer provides certified documents.2Status copies provided by Trademarks through 7/5/94. Due to the PTO reorganization in FY 94, Trademarks nolonger no longer provides status copies.3The number of trademark files provided from the PTO File Repository to the public and the PTO, new issuesfiled, and abandonments filed.


Table 24ACTIONS ON PETITIONS TO THE COMMISSIONER OF PATENTS AND TRADEMARKS(FY 1993 - FY 1994)

Nature of Petition 1993 1994

PATENT MATTERSAcceptance of:

Amendments Filed After Payment of Issue Fee 76 52Late Assignments 54 52Late Issue Fees 893 1,068Late Priority Papers 57 75

Access 63 82Certificates of Correction 21,040 26,268Deferment of Issue 32 45Filing Date 1,105 3,195Interference 1 1Make Special:

Infringement/Manufacture 210 151Other 1,073 1,026

Miscellaneous 2,6531 3,323Maintenance Fees 752 942Public Use 3 4Reexamination Proceedings 74 90Restriction 61 73Revivals 3,322 4,173Rule 47 (37 CFR 1.47) 279 590Supervisory Authority 879 567Suspend Rules 194 780Withdrawal of Attorney 567 635Withdrawal from Issue 662 603Change of Inventorship 520 849Withdrawals of Holding of Aband./Pat. Lapse 1,785 1,812Total Actions of Patent Petitions 36,3552 46,456

TRADEMARK MATTERSAffidavits of Use and Extensions 71 140Decision by Examiner 0 14Grant Application Filing Date 51 63Interferences2 1Make Special 30 52Miscellaneous 16 0Oppositions and Extensions 18 13Record Documents Affecting Title 5 0Restore Jurisdiction to Examiner 5 11Review Board Decisions 9 13Revive 562 709Sections 7 Correction/Amendment 10 20Section 9 Renewal 7 9Section 8 or 15 52 37Waive Fees/Refunds 41 25

Total Actions on Trademark Petitions 879 1,107PETITIONS AWAITING ACTION AS OF 9/30/93

Patent Matters 15,6713 404Trademark Petitions Awaiting Response 202 60Trademark Petitions Awaiting Action 183 104

1FY 1993 data includes petitions under Rule 28 (37 CFR 1.28)2FY 1993 Total Actions on Patent Petitions corrected.3FY 1993 data includes pending Certificates of Correction


Table 25CASES IN LITIGATION (Selected Courts of the United States)

Courts of the United States Pat TM Total

SUPREME COURTEx Parte Cases

Cases Pending as of 9/30/93 0 0 0Cases Filed During FY 94 1 0 1

Total Pending Filed 1 0 1Disposals:

Certiorari Denied 0 0 0Certiorari Dismissed 0 0 0Certiroari Granted-Affirmed 0 0 0Certiorari Granted-Reversed 0 0 0

Total Disposals 0 0 0Total Cases Pending as of 9/30/94 1 0 1

UNITED STATES DISTRICT COURTS1Civil Actions Pending as of 9/30/93 22 4 26Filed During FY 94 10 1 11

Total Pending and Filed 32 5 37Disposals:

Affirmed 2 0 2Modified 0 0 0Reversed 0 0 0Remanded 2 0 2Dismissed 14 4 18Amicus/Intervene 0 0 0Examiner Testimony 0 0 0Transfer 0 0 0

Total Disposals 18 4 22Total Civil Actions Pending as of 9/30/94 14 1 15

1Civil actions in which the Commissioner participated as a party or amicus.

Table 26CASES IN LITIGATION(Selected Courts of the United States)

Ex Parte Inter PartesPat TM Pat TM Total

UNITED STATES COURT OF APPEALS1Cases Pending as of 9/30/93 48 5 29 44 126Cases Filed During FY 94 49 5 7 7 68

Total Pending and Filed 97 10 36 51 194Disposals:

Affirmed 29 2 3 1 35Modified 2 0 1 0 3Reversed 10 0 3 3 16Remanded 0 1 0 0 1Dismissed 17 3 3 2 25Amicus/Intervene 2 0 2 0 4Examiner Testimony 0 0 0 0 0Transfer 1 0 0 0 1

Writs of Mandamus:Granted 0 0 0 0 0Granted-in-Part 0 0 0 0 0Denied 1 0 0 0 1Dismissed 0 0 0 0 0Total Disposals 62 6 12 6 86

Total Cases Pending as of 9/30/94 35 4 24 45 108

1Includes Federal Circuit and Others


Table 27CASES IN LITIGATION 1(Other Jurisdictions-Reported Cases)

MonthPatent Suits Trademark Suits

October (1993) 101 91November 97 103December 101 81January (1994) 82 83February 82 94March 122 125April 59 63May 85 86June 100 141July 85 115August 86 91September (1994) 66 79 Total for FY 1994 1,066 1,152

1Notices received pursuant to 35 U.S.C. 290 and 15 U.S.C. 1116 for both suits filed and decisions.


GLOSSARY OF OFFICE SPECIFIC TERMSALLOWANCE: examiners determine whether a patent can be allowed by searching prior art, which includes previouslyissued U.S. and foreign patents and non-patent literature to help determine whether the claimed invention complies withthe patent statutes and court decisions.

FTE: Full Time Equivalent - equal to one year of one full time staff person.

PATENT APPLICATION: a request from a user for a patent to be granted by the United States Patent and TrademarkOffice.

PATENT APPLICATION, EXAMINED: to determine the qualifications of patent applications requesting the grantingof patents. To determine whether the invention is new, useful and non-obvious to someone knowledgeable in the subjectmatter.

PATENT APPLICATION, DISPOSED (DISPOSAL): patent examiner completes action on the application.

PATENT APPLICATION, ISSUED (ISSUANCE): patent application issued or granted as a patent.

PATENT APPLICATION, WITHDRAWAL (ABANDONED): to surrender one’s claim or right to a request for apatent to be granted.

PATENT PENDENCY: average time in months from filing to either issuance or abandonment.

TRADEMARK: a word, phrase, symbol, design, or combination thereof, that identifies and distinguishes the source ofgoods or services of one party from those of another.

TRADEMARK APPLICATION: application for federal registration of a mark filed at the United States Patent andTrademark Office.

TRADEMARK APPLICATION, EXAMINED: review of application for compliance with the Trademark Act.

TRADEMARK APPLICATION, DISPOSED: an application that is registered or abandoned.

TRADEMARK APPLICATION, ABANDONED: termination of examination for failure to respond to an examina-tion letter, because of a judicial decision, or by request of applicant.

TRADEMARK APPLICATION, REGISTRATION: issuance of a certificate of registration by the United States Patentand Trademark Office.

TRADEMARK PENDENCY: average time in months from filing an application to mailing the first examination letter,and average time in months from filing to registration, issuing a notice of allowance or abandonment.

Budget and Accounting Terms and Definitions

ACCOUNT: Something for which appropriations are made in an appropriation act. For spending that is not provided inan appropriations act, an account is an item for which there is a designated budget account identification number in thePresident’s Budget.

ACCOUNTS PAYABLE: Amounts owed to an account other than your own for goods and services purchased. Suchamounts include disbursements owed to others.

ACCOUNTS RECEIVABLE: Amounts owed to an account for goods furnished and services rendered. Such amountsinclude reimbursements earned and refunds receivable.


APPROPRIATION: An act of Congress that allows federal agencies to incur obligations and make payments from theTreasury for specified purposes. An appropriation is the most common means of providing budget authority and usuallyfollows the passage of an authorized bill.

AUTHORIZATION (Authorizing Legislation): An act of Congress that establishes or continues a federal program oragency either for a specified period of time or indefinitely; specifies its general goals and conduct; and usually sets a ceilingon the amount of budget authority that can be provided in an annual appropriation. An authorization for an agency orprogram usually is required before an appropriation for that same agency or program can be passed.

BUDGET AUTHORITY: The authority granted to a federal agency in an appropriations bill to enter into commitmentsthat result in immediate or future spending. Budget authority is not necessarily the amount of money an agency ordepartment actually will spend during a fiscal year, but merely the upper limit on the amount of new spending commit-ments it can make. The three basic types of budget authority are appropriations, borrowing authority and contractauthority.

BUDGET RECEIPTS: Amounts received by the federal government from the public that arise from:

The exercise of governmental or sovereign power (consisting primarily of tax revenues, but also includingreceipts from premiums of compulsory social insurance programs, court fines, certain license fees, and the like).

Premiums from voluntary participants in federal social insurance programs (such as deposits by States forunemployment insurance and for social security for their employees) that are closely related to compulsory socialinsurance programs.

Gifts and contributions.

Excluded from budget receipts are offsetting receipts, which are counted as deductions for budget authority andoutlays rather than as budget receipts.

CARRYOVER: The unobligated amounts at the end of a fiscal year for unexpired accounts.

CASH BASIS OF ACCOUNTING: A method of accounting in which revenue is recognized at the time the payment isreceived and costs are considered incurred at the time the payment is made.

COLLECTIONS: Any moneys received by the government. Depending upon the nature of the transaction, collectionsmay be treated as budget receipts, offsetting receipts refunds, or credits to a deposit fund.

DEOBLIGATION: A downward adjustment of previously recorded obligations. This may be attributed to cancellationof a project or contract, price revision, or corrections of amounts previously recorded as obligations.

DEPOSIT FUNDS: Accounts established to facilitate the accounting for collections that are either (a) held in suspensetemporarily and later refunded or paid into some other fund of the Government upon administrative or legal determina-tion as to the proper disposition thereof or (b) held by the Government as banker or agent for others and paid out at thediscretion of the depositor.

EXPENDED APPROPRIATION: The amount of expenditures (outlays) during the current fiscal year net of refunds tothe appropriation made from general funds, special funds, and trust funds.

EXPENDITURE: Actual spending, generally interchangeable with outlays.

FISCAL YEAR (FY): Any yearly accounting period. The fiscal year for the federal government begins October 1 andends on September 30.

LIABILITY: Accounts owed for items received, services rendered, expenses incurred, assets acquired, constructionperformed, and amounts received but not as yet earned.

INTRAGOVERNMENTAL REVOLVING FUND ACCOUNTS: Funds authorized by law to carry out a cycle ofintragovernmental business-type operations. These funds are credited with offsetting collections from other agencies andaccounts.


OBLIGATIONS: Spending commitments by the federal government that will require outlays either immediately or inthe future.

OBLIGATED BALANCE: The amount of obligations already incurred for which payment has not yet been made. Thisbalance can be carried forward indefinitely until the obligations are paid.

OFFSETTING COLLECTIONS: Money received by the government as a result of business-type transactions with thepublic (sale of goods and services) or as a result of a payment from one government account to another.

OFFSETTING RECEIPTS: Money collected by the federal government that is deducted from budget authority andoutlays because it comes from market-oriented government activities or intragovernmental transactions.

RECEIPT ACCOUNTS: Accounts established for recording collections deposited into the Treasury for appropriation bythe Congress. These accounts may be classified by the Congress.

REIMBURSEMENTS: Sums received by the government for commodities sold or services furnished either to the publicor to other government accounts that are authorized by law to be credited directly to specific appropriation and fundaccounts. These amounts are deducted from the total obligations incurred (and outlays) in determining net obligations (andoutlays) for such accounts.

UNEXPENDED BALANCE: The amount of budget authority unspent and still available for conversion into outlays inthe future; the sum of the obligated and unobligated balances.

UNOBLIGATED BALANCE: The portion of budget authority that has not yet been obligated. In one-year accountsthe unobligated balance expires (ceases to be available for obligation) at the end of the fiscal year. In multiple-year accounts,the unobligated balance may be carried forward and remain available for obligation for the period specified. In no-yearaccounts the unobligated balance is carried forward indefinitely until specifically rescinded by law or until the purposes forwhich it was provided have been accomplished.


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For Additional InformationContact:

Mr. Richard MaulsbyDirector

Office of Public AffairsU.S. Patent and Trademark Office

Washington, D.C. 20231

(703) 305-8341